Publication of tax reforms for 2020

After deputies and senators approved amendments to several fiscal laws as part of the Economic Package 2020, yesterday, December 9, the Official Gazette of the Federation published the Decree amending, adding and repealing several provisions of the Income Tax Law, the Value Added Tax Law, Excise Tax Law and the Federal Fiscal Code (“Decree”), which will enter into force on January 1^st, 2020, with certain exceptions.

The Decree includes several significant reforms to the fiscal legal framework, including the following:

• Federal Fiscal Code

1. Business reason. Criteria for the presumption of its non-existence and reclassification of legal acts.
2. Reportable schemes by taxpayers and tax advisors.
3. Joint and several liability of general managers and directors, sole administrators, shareholders, partners, and liquidators.
4. Relevant transactions subject to report.
5. Rules for the validation and cancellation of e-signatures and digital seal certificates.
6. Prohibition for public servers to conclude contracts with non-complying taxpayers.
7. Definition of third-party tax collaborator.

• Income Tax Law

1. Non-deductible interests.
2. Limitations to the deductibility of payments made by entities resident in Mexico to related parties resident abroad regarding Preferential Tax Regime (PTR), hybrid vehicles or structured payments.
3. Revenues subject to PTR and exceptions.
4. Legal framework for investments and income of foreign legal entities and transparent foreign entities
5. Redefinition of permanent establishment in Mexico.
6. Regulatory framework for maquila activities under the shelter modality.
7. Procedure for payments to sub-accounts of retirement insurance.
8. Elimination of tax incentives for private infrastructure and real estate trusts (FIBRAS).
9. Revenues from technology platforms, computer applications and the like.
10. Legal treatment for commercial, scientific and industrial equipment leasing.

• Value Added Tax Law

1. VAT withholding in outsourcing.
2. VAT credit.
3. VAT withholding in the case of digital services provided by residents abroad without a permanent establishment in Mexico.
4. Exemption for authorized donors.

• Excise Tax Law

1. Actualization of applicable fees.
2. Offset of favorable balances.