25 Nov Tax amendments relating to capital stock increases and decreases in Mexican entities
Certification of existence of liabilities registered in the accounting records and their value
On January 1st, 2021, the Article 30 of the Federal Tax Code was amended to establish that the tax authorities may require additional documents from taxpayers to prove the economic substance of the increases or decreases in the capital stock of companies.
Formerly, the companies were only required to keep the minutes relating to capital stock increases and decreases. As a result of the recent tax law amendment, taxpayers will be now required to also keep the documents that certify the existence of the liabilities registered in the accounting records (known as “accounting existence”) and their corresponding value.
Through the Miscellaneous Tax Resolution for 2021, rule 2.8.1.23 "Certification of accounting existence of liabilities and their corresponding values" a certification must be issued by a Registered Public Accountant and must contain, among other matters, the following documentation and information (please consider that only some of the required information is listed below for reference purposes):
1. Document evidencing obligation from which the capitalized liability was originated.
2. Regarding liabilities resulting from transactions with suppliers, a statement that the internal control of the legal entity was verified.
3. Indication on whether the capitalized liability complies with Financial Reporting Standards C-9, C-11 and C-19 and correlated norms of the International Financial Reporting Standards that apply to the taxpayer’s accounting records.
4. Documentation or account statements evidencing that the resources subject matter of the obligation where the capitalized liability is based, were actually delivered.
5. Regarding liabilities arising from debt securities or financial instruments, the interest accrual calculation must be validated.
6. Regarding liabilities from debt financial instruments in which their value is determined according to the fair value method, the methodology according to which such value was calculated must also be stated.
7. Date and value of the initial recognition of the liability and, if applicable, the increases or decreases that support the debt on the date of capitalization.
8. Number and value of the shares or equity interests that were allocated.
9. Details of the minutes of the meeting in which the capitalization of the liability is recorded, as well as all the commercial records “in which it was notarized” (Please note that the meeting minutes are notarized with a notary public and then registered at the public registry of commerce. The wording of this rule is a bit confusing).
In consideration of the above new obligations and requirements, it is extremely important that the accounting, financial and legal departments of companies work together to properly integrate the file of the increase or decrease of capital stock, to have the necessary support documents in case of an audit from the tax authorities and avoid the risk that any accounting records on capital stock movements are questioned or invalidated.
If you have any questions, require our assistance or additional information, please contact the professionals of Cuesta Campos.
Contact
Rafael Sánchez
rsanchez@cuestacampos.com
Franscela Sapien Olea
fsapien@cuestacampos.com
The above is provided as general information prepared by professionals with regard to the subject matter. This document only refers to the applicable law in Mexico. While every effort has been made to ensure accuracy, no responsibility can be accepted for errors or omissions. The information contained herein should not be relied on as legal, accounting or professional advice being rendered.