Can VAT be credited in compensation as a means to extinguish obligations?

By Santamarina Steta

Executive Summary:

In August 2022, the Administrative Plenary of the Sixteenth Circuit resolved that the compensation applicable in civil law is not a means of payment to credit VAT. Until now, a mandatory criterion only in the state of Guanajuato.
A Collegiate Court in the State of Coahuila issued a thesis that there is no legal prohibition to consider creditable and effectively paid the VAT transferred between individuals whose origin is compensation.
On March 15, 2023, the Second Chamber of the Supreme Court of Justice of the Nation will resolve the contradiction of criteria. A decision that will be mandatory throughout the country.

In August 2022, the jurisprudence issued by the Plenary on administrative matters of the Sixteenth Circuit was published, through which it resolved that, to analyze the origin of a request to return a balance in favor, the figure of the appropriate compensation in civil law it is not a means of payment to credit the value-added tax.

This measure is only mandatory in Guanajuato, causing many companies in that region to stop applying for compensation as a means of payment, which has affected their operation and business model with customers and suppliers.

However, a Collegiate Court in the State of Coahuila, when solving two direct protection, issued a thesis in the sense that there is no legal prohibition to consider creditable and effectively paid the value-added tax that is transferred between individuals by operations carried out between them that originate in compensation.

Given the contradiction of both criteria, it will be the Second Chamber of the Supreme Court of Justice of the Nation who, on March 15, will be in charge of deciding definitively on whether the compensation is a means of payment of VAT and, therefore, if when using this figure it is possible or not to credit the tax or request a refund of the generated balances. This decision will be mandatory throughout the country.

If the Supreme Court effectively resolves this situation, their pronouncement is relevant since the compensation is used by many companies that would be affected if the criterion that until now is only mandatory in Guanajuato.

The consequences of said resolution must be analyzed in each case, especially the harmful impact it may have on inter-company operations, for example, in a centralized treasury, and loans, among others.

The Santamarina + Steta Tax area team is at your service to provide the necessary advice.

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