28 Mar The Value Added Tax compensation will not be viable as a payment method.
Recently, the second chamber of the Mexican Supreme Court of Justice, interpreting the 2019 and 2020 Tax Laws, published a jurisprudence about the compensation of Value Added Tax (“VAT”). The Court determined that the civil figure of compensation is NOT applicable for tax purposes, as a payment method, and therefore, it is not a payment method for terminating tax obligations. Consequently, the taxpayers may not request a refund of their tax credit balance nor the credit of such tax resulting from a compensation. In addition, it was clarified that it is a question of compliance with obligations, since the final consumer (subject to the payment of the tax) demonstrates having paid it and thus accredited the tax to the taxpayer who bears the final obligation to pay it to the tax authority.
Court resolution date March 15, 2023.
https://www.internet2.scjn.gob.mx/red2/comunicados/noticia.asp?id=7277
Resolution: https://www.scjn.gob.mx/sites/default/files/versiones-taquigraficas/documento/2023-03-15/ATAQ-15-03-2023.pdf
The foregoing may result in the tax authority initiating assessment procedures to reject VAT credits, or applications for the refund of VAT in favor. The foregoing may generate fiscal and financial risks for taxpayers with respect to previous returns, therefore, they should review and modify their VAT payment methods, in case they have been paying VAT using the compensation method.
If for prior fiscal years you or your company have been using compensation as a method of payment of VAT, it is important to review and analyze your case to identify the risk exposure and possible alternatives to reduce such risk. If you wish that our firm reviews any implications for your company, please do not hesitate to contact us.
Contact
Rafael Sánchez
Franscela Sapien
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.