Go to main content
shutterstock 1348992512

Impact of outsourcing on Mexican operations (employment structures)

Written by Santamarina + Steta en . Published in Updates.

Mexico's outsourcing reform includes significant restrictions on such services, so companies doing business in Mexico must be aware of them and the risks in case of non-compliance.

Our partner, Ernesto de la Puente, writes for the Southwestern Institute for International and Comparative Law Newsletter This article provides an overview of the applicable regulations and offers practical advice when analyzing employment structures in Mexico.

Read Article
shutterstock 2342114079

The ABC of immigration obligations and actions to prevent and address labor disputes

Written by Santamarina + Steta en . Published in Events and Webinars.

Maria Elena Abraham, Victor Hugo Coria y Eduardo Barreira-Reynoso Monterrubio participate in the event “The ABC of immigration obligations and actions to prevent and/or address labor disputes.”

At this conference, organized by CCI France Mexico, They will discuss the importance of knowing the various obligations for foreigners in Mexico, the inspection procedures in immigration matters, as well as the preparatory activities for handling labor disputes in accordance with the new reform.

If you wish to participate, please contact CCI France at:
administracion@franciamexicobajio.com

October 17, 2023 | 8:30 AM
Domun Hotel, Querétaro

Recovery fee:
Members: $250 + VAT MXN
Non-Members: $550 + VAT MXN

We look forward to seeing you soon!

UPDATE NEW TAX INCENTIVES GRANTED TO THE EXPORT INDUSTRY WEBSITE

New tax incentives granted to the export industry

Written by Santamarina + Steta en . Published in Updates.

Download

Executive Summary:

  • On October 11, the Decree was announced granting tax incentives to key sectors of the export industry, consisting of the immediate deduction of investment in new fixed assets and the additional deduction of training expenses.

On October 11, 2023, the Decree granting tax incentives to key sectors of the export industry was published in the Official Gazette of the Federation, consisting of the immediate deduction of investment in new fixed assets and the additional deduction of training expenses.

Through this Decree, the Federal Executive grants tax incentives with the following characteristics:

BENEFICIARIES

Legal entities under the general regime and the simplified trust regime, as well as natural persons with business and professional activities, who are dedicated to the production, processing or industrial manufacturing of goods and also export the following goods:

  • Products intended for human and animal consumption.
  • Fertilizers and agrochemicals.
  • Raw materials for the pharmaceutical industry and pharmaceutical preparations.
  • Electronic components such as single or charged cards, circuits, capacitors, condensers, resistors, connectors and semiconductors, coils, transformers, harnesses and computer and telephone modems.
  • Machinery for watches, measuring, control and navigation instruments, and medical equipment
  • electronic, for medical use.
  • Batteries, accumulators, cells, electrical cables, plugs, contacts, fuses and accessories for electrical installations.
  • Gasoline, hybrid and alternative fuel engines for cars, vans and trucks.
  • Electrical and electronic equipment, steering systems, suspension, brakes, transmission systems, seats, interior accessories and stamped metal parts for automobiles, vans, trucks, trains, ships and aircraft.
  • Internal combustion engines, turbines and transmissions for aircraft.
  • Non-electronic equipment and devices for medical, dental and laboratory use, disposable medical supplies and optical articles for ophthalmic use.

Also included as beneficiaries are taxpayers engaged in the production of cinematographic or audiovisual works, the content of which is protected by copyright under the terms of the applicable regulations, provided that these works are exported. 

ASSUMPTION OF APPLICATION 

When taxpayers estimate that, during the fiscal years 2023 and 2024, the amount of income from the export of goods or works will represent at least 50% of their total turnover in each fiscal year.

STIMULUS

1. An immediate deduction may be made for investments in new fixed assets acquired from the date of entry into force of the Decree until December 31, 2024, by deducting in the fiscal year in which the investment is made the percentages of the original investment amount established in the Decree by type of asset, which are higher than those indicated in the Income Tax Law (LISR). The excess part of the original investment amount will be deducted in accordance with the terms of the Decree itself.

It may only be applied to investments that taxpayers keep in use for a minimum period of two years immediately following the fiscal year in which their immediate deduction is made, except in certain cases established by law.

Likewise, it will only be applicable in the case of investment in new fixed assets, the acquisition of which is intended for exclusive use for the development of key activities.

It may not be applied to office furniture and equipment, cars powered by internal combustion engines, car armoring equipment or any fixed asset that is not individually identifiable, nor to aircraft other than those used for agricultural aerial spraying.

2. They may also apply in the annual declaration for the fiscal years 2023, 2024 and 2025, an additional deduction equivalent to 25% of the increase (difference with the average expenditure from 2020 to 2022) in the expenditure incurred for training received by each of their workers in the fiscal year in question. 

Training is that through which technical or scientific knowledge related to the taxpayer's activity is provided to active workers registered with the Mexican Social Security Institute.

OBLIGATIONS

Those who apply for any of the incentives must comply with the specific rules for each case indicated in the Decree, the general deduction rules established in the LISR, as well as be duly registered in the RFC, have an active tax mailbox, have a positive opinion of compliance with tax obligations, as well as submit a notice within thirty calendar days immediately following the month in which they apply the aforementioned incentives for the first time.

In the event that the amount of income or any of the requirements indicated is not met, the tax, the update and the corresponding surcharges must be paid, in accordance with the applicable legal provisions, and the tax incentives must be cancelled.

EXCEPTIONS

Taxpayers who are on the so-called "SAT blacklists", have insufficiently or unsecured tax credits, are in liquidation, and who have had their use of digital stamps for issuing digital tax receipts online restricted or cancelled will not be able to apply for the incentives.

To find out more details and determine whether it is possible to apply these stimuli, we invite you to contact one of the specialists at Santamarina and Steta, who will be happy to advise you.

UPDATE GUIDELINES HYDROCARBONS SITE 1

Modifications to the Guidelines for the Development of Emergency Response Protocols in the Hydrocarbon Sector

Written by Santamarina + Steta en . Published in Updates.

Download

Executive Summary:

  • On September 25, 2023, the Agency for Safety, Energy and Environment (“ASEA”) published in the Official Gazette of the Federation the Agreement modifying, repealing and adding various articles of the General Administrative Provisions that establish the Guidelines for the preparation of emergency response protocols in the activities of the Hydrocarbon Sector (the “Guidelines”).
  • Following a review of the original Guidelines by ASEA, the agency identified the need to modify them in order to simplify the administrative burden on those regulated.
  • The main areas of change and modification in the Guidelines include definitions, the frequency of their updates, the treatment of the Emergency Response Protocol (“PRE”) and certain derogations. 

The amendments to the Guidelines aim to achieve a balance between simplifying administrative processes and ensuring safety and environmental protection in the hydrocarbon sector. Companies must be aware of these changes and ensure that their emergency response protocols comply with the new regulations to ensure regulatory compliance and safety in their operations.

Major areas of change and modification include:

  1. Definitions: The definitions of the following key terms related to emergencies, accidents and protocols are clarified and expanded: Accident, Spill, External Emergency Response Plan (PAEE), Internal Emergency Response Plan (PAEI) and PRE. This is crucial to ensure a common and accurate understanding of key concepts among companies in the hydrocarbon sector.
  1. PRE Update: Regulated entities must meet minimum requirements to integrate the PRE into their Industrial Safety, Operational Safety and Environmental Protection Management System, as well as its updates. The PRE must be updated in the following cases: a) every 5 years, b) when there are changes in the design or process that affect the risk analysis and emergency scenarios, and c) when the environment changes with infrastructure that may generate risks or in the event of events classified as type 2 or 3 according to the provisions for reporting incidents and accidents to ASEA. In addition, regulated entities must comply with the structure defined in these modified Guidelines and keep these updates available at their facilities.
  1. Addition of essential data to be included in the PRE general information: This includes the Regulated Person's Unique Registration Code (CURR) or the Administration System authorization number, a detailed description of the operations with flow charts, and a plan showing the geographic location of the facility. These elements are crucial for an effective response in emergency situations.
  1. Repeals: The revised Guidelines repeal certain sections and formats related to attention to recommendations and summary tables:

a) Section V of Article 8 of the PRE, which required the inclusion of the Action Plan to address recommendations arising from the Risk Analysis for the Hydrocarbon Sector (“ARSH”), is eliminated.

b) Article 13, which required regulated entities to develop an Action Plan to address, monitor and close specific recommendations derived from the Risk Analysis for the Hydrocarbon Sector (ARSH) related to emergency response, is eliminated.

c) Article 18 has been amended to remove specific deadlines for submitting Emergency Response Protocol (ERP) updates. Previously, updates were required to be submitted to the Agency within defined timeframes, depending on the specific circumstances. These deadlines have been removed, and all updates are now referenced as being to be conducted in accordance with the amended Guidelines and using Form FF-ASEA-037 “Emergency Response Protocol Update.”

d) Article 19, which established that regulated entities involved in high-risk industrial, commercial or service activities, in accordance with Article 147 of the General Law on Ecological Balance and Environmental Protection, must apply these Guidelines for the implementation of the Accident Prevention Program, is eliminated.

e) Annex IV, which contained a summary table of the Action Plan to address recommendations derived from the Risk Analysis for the Hydrocarbon Sector (ARSH), as well as the Emergency Response Protocol Entry Format (FF-ASEA-036) and the Emergency Response Protocol Update Format (FF-ASEA-037), are eliminated.

The revised Guidelines came into effect on September 26, 2023, meaning that companies in the process of submitting emergency response protocols will be required to comply with the new regulations. However, applications pending before that date will be evaluated under the original Guidelines. 

Post link:

  • https://www.dof.gob.mx/nota_detalle.php?codigo=5702771&fecha=25/09/2023#gsc.tab=0
shutterstock 1822778105

Event | Commercial Arbitration: Current and future business vision

Written by Santamarina + Steta en . Published in Events and Webinars.

The Young Arbitrators Committee of Nuevo León of the International Chamber of Commerce (ICC Mexico) invites you to this in-person session where the topic “Commercial Arbitration: Current and Future Business Vision” will be discussed. The session is free of charge and includes a toast at the closing sponsored by Santamarina + Steta.

Thursday 5 October 2023
18: 00 - 20: 00 hrs.
Santamarina and Steta (Monterrey)
Ricardo Margáin Zozaya 335, tower I floor 7, Valle del Campestre,
San Pedro Garza Garcia, NL, 66265

More information and registration
class =

*Please fill out this form individually.

shutterstock 2007489041

2023 Mediation Writing Competition in Mexico

Written by Santamarina + Steta en . Published in Events and Webinars.

For the third consecutive year, The Weinstein International Foundation, the Institute for Legal Research from UNAM and Santamarina + Steta organize the mediation writing contest.

The contest is open to any law student in Mexico and there is a prize of $1000 dollars for the winner. For more information or questions, write to mediation.wif.mexico@gmail.com.

Register
Details of the call
class =
Mexico Residency Cards Travel Docs

Suspension of deadlines by the National Migration Institute

Written by Santamarina + Steta en . Published in Updates.

Download

We inform you that, as of last Monday, September 18, 2023, the National Migration Institute has determined and communicated to users - unofficially - the cessation of the suspension of deadlines for immigration procedures that has been in force since May 2020 by virtue of the health emergency derived from the pandemic caused by the SARS-CoV-2 virus (COVID-19). The above is based on the agreement published in the Official Gazette of the Federation on May 9 of this year, by which the termination of the extraordinary action in matters of general health in the national territory was declared by virtue of the disappearance of the emergency causes that motivated its exercise.

For this reason, temporary residents whose immigration documents have expired and who wish to continue residing in Mexico will no longer be able to request late renewal of the same and, instead, must request regularization of their immigration status in order to be able to continue residing in Mexico.

On the other hand, those notifications of change of address, place of work, marital status, name or nationality that are made outside the 90-day period provided for in article 63 of the Migration Law will again give rise to the imposition of a fine that will range between twenty and one hundred Measurement and Update Units (UMA).

For more information, please contact the immigration advisors at Santamarina and Steta, SC. ​​We remain at your service for any comments or questions that may arise from the above.

economic package 2024 scaled 1

Economic Package 2024

Written by Santamarina + Steta en . Published in Updates.

Download

Executive Summary:

  • The 2024 Federal Budget Project anticipates a significant increase, with proposed resources equivalent to 26.2% of the Gross Domestic Product (GDP).
  • Faced with an economic package that anticipates higher spending without fiscal reform to support it, it is likely that acts of oversight by the authorities will multiply.

From the content of the recently presented economic package for 2024, it is clear that captive taxpayers will continue to be subject to strong collection pressures. The emphasis and increase in spending for social programs and infrastructure projects reflects the administration's priorities. Despite these goals, no tax reform has been proposed.

For 2024, the Draft Federal Budget anticipates a significant increase in real terms, with proposed resources equivalent to 26.2% of Gross Domestic Product (GDP), representing a 1.2-fold increase compared to 2018. In terms of tax revenue, tax collection is expected to increase, reaching 14.4% of GDP, the highest level on record, representing a 2.1% annual real growth compared to what was approved for 2023. However, the financial outlook also shows challenges, as budget deficits of 3.3% and 4.9% of GDP are anticipated for 2023 and 2024, respectively.

Given that the fiscal rules of 2023 will remain in place, given the growth in public spending for 2024, it is expected that the authorities will intensify the monitoring of captive taxpayers.

Throughout this administration, we have observed the implementation and strengthening of highly effective oversight tools. With a 2024 economic package that anticipates higher spending without a fiscal reform to support it, oversight actions by authorities are likely to multiply.

It is essential for taxpayers to remember that they have rights of defence. These should be exercised if they consider that the authority is violating their rights. In many cases, an enforcement approach is used that does not necessarily determine actual non-compliance, leaving taxpayers with the task of proving their compliance without the appropriate tools or the necessary expertise.

We would like to emphasize that we are here to support you in this scenario of increased oversight, advising you on the preventive fulfillment of your tax obligations and, if necessary, in defense against arbitrary actions by the authorities.

shutterstock 1917033230 scaled 1

The TFJA defines Criteria on the Imposition of Technical Assistance Services in International Operations

Written by Santamarina + Steta en . Published in Updates.

Download

Executive Summary:

  • The Federal Administrative Court (TFJA) has recently issued a ruling in which it reiterates its position on the taxation of technical assistance services in the international framework.
  • This criterion, which is specific to the Treaty between Mexico and the Netherlands, establishes that payments for such services are not categorized as “Business Benefits,” which has significant tax implications for companies involved in these services.

Context and Scope of the Resolution

The TFJA established that technical assistance services do not qualify for the treaty withholding exemption for “Business Benefits.”
Taxpayers will have to face a 25% withholding, according to article 167 of the Income Tax Law.

Legal Basis

The decision is based on Article 3 of the Treaty between Mexico and the Netherlands, which allows the use of domestic law to define ambiguous terms.
According to Article 15-B of the Federal Tax Code (CFF), technical assistance is considered a provision of professional services and not a “Business Benefit” as provided by Article 16 of the CFF, which defines “Business Activities.”

Contrast with the Commentaries of the OECD Model

The TFJA criterion contravenes OECD guidelines, which consider that the provision of professional services (such as technical assistance) is considered a “Business Benefit” if they are not regulated in other articles of the treaty.

Practical Implications

Companies offering or contracting technical support services in Mexico should conduct detailed review and careful planning, especially if they operate under international treaties.

shutterstock 2135917727 scaled 1

Limitations on VAT crediting in payments in kind

Written by Santamarina + Steta en . Published in Updates.

Download

In the context of the jurisprudence that eliminated the crediting of VAT paid through civil compensation, new precedents have been raised that could also restrict the crediting of VAT when a “payment in kind” is presented. Payment in kind is the fulfillment of an obligation through the delivery of goods or services.

Recently, the Tenth Collegiate Court on Administrative Matters of the First Circuit issued a thesis in which it established that the VAT covered by a payment in kind cannot be considered as effectively paid, which implies denying the origin of the credit and the return of the balance in favor of the tax.

In this case, the principal obligation that generated the VAT was paid through a debt capitalization. Although the principal debt was settled through the issuance of shares, the Court determined that the VAT related to the transaction was not creditable, since it could not be considered “effectively paid” since it was not covered in cash, but through the issuance of shares.

The Court's analysis was based on the recent case law that established that VAT is not considered to be effectively paid unless it is transferred in cash. This criterion was used to eliminate the crediting of VAT in cases of compensation. However, as can be seen, this recent case law is having implications in new cases, such as the present one. These new precedents could imply that many daily transactions that generate VAT must be analyzed and restructured. 

Please feel free to contact us if you need a review of how these new precedents may impact your business model. We are available to provide advice and guidance specific to your situation.

shutterstock 2206300975 scaled 1

The Supreme Court confirms the constitutionality of the Beneficiary Controller

Written by Santamarina + Steta en . Published in Updates.

Download

Recently, the Second Chamber of the Supreme Court of Justice of the Nation confirmed the constitutionality of the tax provisions related to the identification of the Controlling Beneficiary (CB) in Mexico. These rules seek to comply with international commitments and prevent tax evasion and money laundering.

In Mexico, all legal entities, whether legal entities, trusts or other figures, must identify their CBs. These are the individuals who receive the benefits of the entity or control it. If an entity fails to comply, it can face fines between $500,000.00 and $2,000,000.00 for each unidentified beneficiary.

Identifying CBs can be complex. It requires understanding the entity's structure and gathering sensitive information. In addition, this information must be updated with any changes in the entity's ownership or structure.

This precedent is important because it limits taxpayers' defense against these obligations, which can be difficult to comply with. If you have questions or need more information on how to identify your CB, you can contact us. We are here to help you comply with all your tax obligations.

shutterstock 1516976612 scaled 1

COFECE enables the procedure for the issuance by electronic means of opinions or resolutions on the granting of licenses, concessions, permits and similar.

Written by Santamarina + Steta en . Published in Updates.

Download

Executive Summary:

  • On September 12, 2023, the new procedure before COFECE for requests for opinions or resolutions on the granting of licenses, concessions, permits, transfers, sale of shares of concessionaire or permit-holding companies or other similar issues came into force.

On September 12, 2023, the Agreement by which the Plenary of the Federal Economic Competition Commission (COFECE) declared the functionality of the Electronic Request System for Bids and Opinions (SISELO) ready for the submission of requests for opinions or resolutions on the granting of licenses, concessions, permits, assignments, sale of shares of concessionaire or permit-holding companies or other similar matters, in accordance with articles 98 and 99 of the Federal Economic Competition Law (LFCE), came into force.

With the publication and entry into force of the aforementioned Agreement, as of September 12, 2023, the Guidelines for the issuance of opinions or resolutions on the granting of licenses, concessions, permits and similar, by electronic means before COFECE (Guidelines) come into force, which establish the bases for the substantiation of the procedure for requesting opinions or resolutions on this matter.

It is important to note that the Guidelines are of a general nature and must be observed by all users of the COFECE Electronic Procedures System (SITEC), as well as by Public Authorities and Economic Agents who fall within the scope of Articles 98 and 99 of the LFCE. Thus, all requests for opinions or resolutions on the granting of licenses, concessions, permits, assignments, sale of shares of concessionaire or permit-holding companies or other similar issues must now be submitted through SISELO.

The Agreement issuing the Guidelines can be consulted at: https://www.dof.gob.mx/nota_detalle.php?codigo=5679329&fecha=13/02/2023#gsc.tab=0

The Agreement declaring SISELO functionality ready can be consulted at: https://www.dof.gob.mx/nota_detalle.php?codigo=5701403&fecha=11/09/2023#gsc.tab=0