EXECUTIVE SUMMARY:
- As we informed you in the Update of March 2023, as of May 12, 2023, the jurisprudence by which the Second Chamber of the Supreme Court of Justice of the Nation determined that civil compensation is not a means of payment for VAT, nor can it give rise to a request for a credit balance or accreditation, is mandatory for all Courts.
- This has generated uncertainty regarding its application and possible effects for taxpayers who offset debts.
On May 12, 2023, jurisprudence 2a./J. 19/2023 (11a.) was finally published, issued by the Second Chamber of the Supreme Court of Justice of the Nation, which essentially states that, although civil compensation is a means of extinguishing the principal debt, it cannot be considered as a means of payment for VAT purposes, therefore, if compensation is used for the VAT part, this cannot be credited nor can a refund of the balance in favor derived from it be requested.
In this regard, although the ruling refers to the VAT Law in force in 2019 and 2020, the truth is that the scope and obligatory nature of the criterion has generated multiple questions regarding its application by the Courts and, of course, by the tax authority.
Some harmful consequences that could arise for taxpayers who use or have applied the figure of compensation in their transactions are mainly:
- Uncertainty regarding the possibility of applying case law to the past, which could lead to reviews by the authorities, with respect to the last five years, in which the rejection of the crediting of the compensated VAT is determined and, consequently, to the determination of tax credits.
- Refusal of refunds in process.
- Reviews of previously authorized returns in which verification powers were not exercised.
- Analysis of a possible change in the way taxpayers who use offsetting on a daily basis operate; assessment of the possible risks if they do not do so.
- Possible absorption of VAT as a cost, as it must necessarily be paid in cash.
- Evaluating operational issues and potential risks in the event of applying options such as offsetting the principal amount of the debt and paying VAT in cash.
In this regard, we recommend that all our clients carefully analyse the impact that such jurisprudence may have on their various operations, in order to anticipate and mitigate potential VAT risks. At Santamarina + Steta we will be happy to advise you.
