On May 9, 2022, Mexico’s Department of Economy published a Decree as to General International Trade Rules and Criteria in the Official Journal of the Federation, which entered into force on the same date of publication.
The following provisions are worth noting from the new General International Trade Rules and Criteria (hereinafter referred to as “the Rules”).
A) General definitions and filings
The Rules update certain definitions, add new ones and clarify items regarding various matters that were poorly or confusedly regulated under the prior rules.
Among the new definitions worth mentioning, “agreement as to administrative facilities” is included, which refers to a publication in the Official Journal of the Federation on August 4, 2021, which allows parties to carry out filings by electronic means regarding several procedures before the Department of Economy.
Likewise, the Decree clarifies that for purposes of the Rules, the term “certified companies” is understood exclusively as companies with a VAT Certification.
The Rules set forth that, when so required for certain filing procedures, the domiciles of the interested parties may be evidenced only by providing one of the following documents: i) property tax, electricity, landline or water bill, issued within the last three months; ii) bank statements, issued within the last three months; iii) lease or sublease agreement with the latest payment receipt for the immediately preceding month; iv) payroll tax payment receipts; or v) domicile certification issued by the corresponding Municipality, issued within the last three months.
As to the official identifications accepted for trade procedures carried out before the Department of Economy, the Rules include only: voter’s identity card, passport or professional license.
Regarding general filings that must be carried out through the Virtual Filing Office, the Rules establish that interested parties must file a notice appointing two contacts with name and e-mails, and expressly authorizing them to receive information and notices through such e-mail addresses.
Finally, the Rules set forth specific terms for each of the filings available, and state that such terms may be increased as long as there is justified cause, supported and evidenced by the competent authority.
B) IMMEX program
Statement of facts. The information that must be included in a written statement of facts is included, such as: a) location of the domicile(s) where the manufacture or services are performed, including characteristics, conditions, details of the facility, area in square meters with photographic evidence; and b) inventory of the machinery, equipment and furniture, and documents supporting the certified legal possession of such assets, including photographic evidence.
Likewise, the Decree provides that the statement of facts may not be older than three months and may be issued only by a public mercantile processor authorized by the Department of Economy. Notwithstanding the foregoing, the Decree’s transitional articles state that any statements of facts filed within the six months following the entry into force of the Rules will be considered as valid, even if such is issued by a notary public; after such term, only those issued by public mercantile processors will be accepted.
Inspection visits. As an alternative to filing a statement of facts when so required, a written request may be made, so that authorized personnel, including among others, public officials of entities of the Public Administration (federal or local) with collaboration agreements in place, may perform inspection visits at the domicile(s) of the interested party.
Favorable opinion of the tax authorities. The Rules detail that for purposes of being approved with a new IMMEX program, a favorable opinion from the Tax Administration Service (SAT), will exist when the following requirements, among others, are met: being active in the Federal Taxpayers Registry (“RFC”); having a recent positive tax compliance opinion; having domiciles recorded and active with the RFC, etc.
Delimitation and independence of IMMEX areas. The Rules adopt the criteria of delimitation and independence for those cases in which there are two or more companies with an IMMEX program within the same property, which were previously published through official letter number 414.2020.2288, during the second half of 2020.
Certified Company notices. Certified companies maintain the exemption from having to amend their IMMEX programs to incorporate new tariff codes for raw materials to be temporarily imported or for final product for exportation. However, there is a new obligation to provide notice to the Department of Economy when such is the case, in order to maintain the information with such agency up to date.
New domiciles. The requirement to file a statement of facts to register a new domicile is eliminated; instead, companies must file a notice complying with certain requirements.
Amendment to services IMMEX program. The Rules include a formal procedure to request the amendment of activities to be provided for an IMMEX program under the services modality, with one of the requirements being the filing of a statement of facts.
Amendment of IMMEX program for sensitive materials. The requirement to ratify a public accountant’s report is eliminated for the increase of sensitive materials; for the authorization of any subsequent amendments, the exportation of 100% of those materials imported needs to be shown, instead of the 70% requirement per the former international trade rules.
Amendments to information. Any changes to the information originally reported to obtain the IMMEX program, such as name, RFC, members or shareholders, legal representative and tax domicile, and mergers and spinoffs must be reported within 10 days following the occurrence of such change.
Contact Information:
Miriam Name | mname@ccn-law.com
Enrique Hill | ehill@ccn-law.com.mx
On April 17, 2022 the Chamber of Deputies debated the constitutional amendments on energy matters proposed by president Andres Manuel Lopez Obrador at the end of September 2021 (the “Initiative”). The Initiative aimed to decrease private participation to 46% of the total electricity generated in Mexico; to guarantee that 54% of such production would come from the State-owned Federal Electricity Commission (“CFE” per its Spanish acronym); and to establish that the generation and supply of electricity would belong exclusively to the State, among other changes which would limit the involvement of private investment, whether domestic or foreign, in a sector of vital importance for Mexico.
After more than 10 hours of discussion, the Initiative was dismissed for failing to reach 332 votes out of 498 attending deputies, receiving 275 votes in favor from MORENA and allied parties, and 223 votes against from PAN, PRI, PRD, and MC. Therefore, the Initiative fell short of the two-thirds super-majority required to continue with the procedure of enacting a constitutional amendment.
Going forward, the energy sector’s constitutional framework will not be changed and private companies will continue to be able to invest in and develop electricity generation and supply projects. Likewise, consumers will continue to have alternatives for procuring electricity from the electricity market.
The attorneys in CCN’s energy practice group are available to respond to questions from readers in connection with the current Mexican legal environment generally, or specific projects and issues.
Contact Information:
José María Lujambio | jmlujambio@ccn-law.com
Antonio Riojas| ariojas@ccn-law.com.mx
This week, Mexico’s Supreme Court of Justice is facing an enormous challenge as guardian of the Constitution and watchdog over the other branches of Mexico’s government, with historic implications for the country’s electricity sector. The Court is meeting in plenary session to discuss and rule on the legal action of unconstitutionality 64/2021, as well as constitutional controversies 44/2021 and 45/2021, which challenge the amendments to the Electricity Industry Law (“LIE”) published in the Official Journal of the Federation on March 9, 2021. These lawsuits were filed by 48 members of the Mexican Senate, the Federal Economic Competition Commission (“COFECE”), and the Government of the State of Colima, respectively. Some days ago, Supreme Court Justice Loretta Ortiz Ahlf submitted draft resolutions stating that the arguments of the plaintiffs have no merits and ruling on the constitutionality of the amendments.
The challenge for the Court is even greater given the context of the electricity sector in the past few years. Since the cancellation of the fourth electricity auction in 2019, the government has advanced a series of operational, administrative, and regulatory measures to favor the Federal Electricity Commission (“CFE”). Such measures include the resolution of the Department of Energy (“SENER”) to modify the criteria for granting clean energy certificates (“CELs”); the reliability policy for the National Electric System, issued also by SENER; and, most recently, a bill submitted by the President to amend the Constitution in order to restructure the electricity sector, which is currently under discussion in the Chamber of Deputies.
The core issue of the LIE amendments is that they modify the order of dispatch (i.e., the order in which electricity from different power plants is delivered to the grid). The amended LIE would implement a new order of dispatch through a new legal instrument called an “electricity hedge contract with obligation to deliver physical energy”, which can only be executed as buyer by the supplier of basic services. In other words, CFE as supplier, without the duty to conduct any tender, would have discretion to award these contracts and decide which generators would benefit from priority dispatch, preferential access to transmission and distribution grids, and fixed cost offers. According to the statement of purpose of the LIE amendments, the objective of all this is to first favor CFE's hydroelectric plants, then dispatch other power plants also owned by CFE, then solar and wind facilities and, finally, combined cycle plants owned by private companies.
The draft resolutions submitted by Justice Ortiz Ahlf dismiss the argument that this new dispatch mechanism violates the principles of free economic competition and concurrence by arguing, in a simplistic manner, that there are generators other than CFE that could have access to these contracts and that CFE is not the only supplier of basic services. The Justice concludes that there is no undue advantage because the new contract is not exclusive to CFE as seller or buyer. However, the draft resolutions overlook the fact that a key actor with monopolistic power, to date the only provider of basic supply, would freely choose with which generators to sign these contracts, in addition to the fact that the purpose of these contracts, as explicitly recognized, would be to benefit CFE.
Other issues addressed in these cases are the change in the criteria for granting CELs; the orders to revoke self-supply permits granted under “fraud to the law”, and to review contracts with independent producers; the obligation of the Energy Regulatory Commission (“CRE”) to consider SENER's planning criteria when granting generation permits, as well as the impact on electric supply tariffs paid by end users.
Although it is not possible to predict how the discussion will develop in the Court, it is very likely that at least six justices will vote against these draft resolutions and hold that the LIE amendments are unconstitutional, while two or three votes would almost certainly be in favor of the proposed ruling, leaving a couple of “swing votes”. Thus, a simple majority that would deem the LIE amendments as unconstitutional appears likely, but it will not be easy to obtain the eight votes required to fully vacate the law. If only a simple majority is obtained, lower federal courts would have the authority to rule under their own criteria on dozens of amparo lawsuits that were also filed against the LIE amendments.
From a legal standpoint, the draft resolutions that will be voted on this week are not compatible with the constitutional rule of law because they ignore rights, principles, and other provisions established in the Mexican Constitution. We can only expect that the Supreme Court will demonstrate its legitimacy as a constitutional court and its independence from political influence, by categorically rejecting the LIE amendments.
This text is a brief version of the article published by the authors on April 4, 2022 in the blog “El Juego de la Suprema Corte” of Nexos magazine; you can read the full article in Spanish by pressing here
Contact Information:
José María Lujambio | jmlujambio@ccn-law.com
Antonio Riojas | ariojas@ccn-law.com.mx
Section IX of Article 123 of the Mexican Federal Constitution (“CPEUM” for its acronym in Spanish) establishes that all employees are entitled to receive a percentage of their employer company’s profits (“PTU” for its acronym in Spanish), which is determined by a National Commission comprised of representatives of employees and employers who conduct research and studies to fix the corresponding percentage as per article 118 of the Mexican Federal Labor Law (“LFT” for its acronym in Spanish). Such figure is based on each company’s income, in accordance with the Income Tax Law (“LISR” for its acronym in Spanish).
Pursuant to section VIII of Article 127 of the LFT, the percentage of profit sharing will have a maximum limit of three months’ wages or the average of the PTU received by the employee over the last three years, whichever is most favorable to the employee.
Further to the applicable legal provisions of the CPEUM, the LFT and the LISR, the amount of PTU is to reviewed from a tax and labor perspective to determine the implications of its calculation and sharing for the employees. The following considerations must also be included in such review:
a) profit sharing payments will be paid within 60 days after the company’s annual income tax due date;
b) outsourcing is now prohibited in accordance with the Decree published on April 23, 2021 in the Official Journal of the Federation amending various provisions of the LFT and other laws governing outsourcing; and
c) that as to the outsourcing prohibition, several companies performed employer substitutions, mergers, and other legal acts, to be in compliance with the new legal requirements governing outsourcing.
Based on the above considerations it is important for all employers to review and understand the process of how to calculate and pay mandatory PTU to their employees.
Contact Information:
Miriam Name | mname@ccn-law.com
Pablo Sáenz | psaenz@ccn-law.com.mx
Javier Zapata | jzapata@ccn-law.com.mx
Fernanda Magallanes | fmagallanes@ccn-law.com.mx
Esteban Gómez Aguado | egomez@ccn-law.com.mx
Mexico’stax authorities published a Decree amending articles 32-B Ter, 32-B Quater,and 32-B Quinquies of the Mexican Federal Tax Code in the OfficialJournal of the Federation last November 12, 2021. Such Decree established anidentification framework applicable to controlling beneficiaries, defined as individualswho directly or indirectly own, control or benefit from the income generated bylegal entities, trusts, and any other type of legal form domiciled in Mexico.
Thesenew tax obligations became effective January 1, 2022 and are in addition to theidentification and reporting requirements established in the Mexican FederalLaw of Prevention and Identification of Transactions with Illicit Proceeds. Thenew tax obligations are regulated by the Miscellaneous Tax Resolutions for 2022in rules 2.8.1.20 to 2.8.1.23.
The referenced requirements may be summarized as follows:
1. Identifying the individual or individuals considered ascontrolling beneficiaries.
2. Identifying the layers in the chain of ownership or indirectcontrol, from the controlling beneficiaries to the source of business.
3. The implementation and safekeeping of information in aninternal file as part of one’s accountability records, as to the information ofthe controlling beneficiaries with supporting documents.
4.Implemention of an internal control system to ensure theinformation in the internal file is trustworthy and is kept updated.
5. The identification and verification of the identity of thecontrolling beneficiaries, which must be performed by a notary public, public mercantileprocessors, and any other person involved in legal acts in connection with the sourceof business, controlled or affiliated entity.
6. Providing to the Tax Administration Service (“SAT” for itsacronym in Spanish) the information of the internal file or the informationheld by a notary public, public mercantile processor, financial institutionsand any other party involved.
The monetary sanctions for not complying with these new taxobligations range from $500,000.00 to $2,000,000.00 Mexican pesos (roughly $25,000.00to $100,000.00 US dollars as of March 2022 exchange rate) for eachnon-complying controlling beneficiary.
If the controlling beneficiary is non-Mexican, it will benecessary to determine on a case by case basis what information and supportingdocuments should be required, which is comparable to the information requested ofMexicans.
The obligation to integrate and keep an internal file appliesequally to legal entities formed prior to January 1, 2022.
These new obligations and the identification framework implementedin Mexico has as its origin in the recommendations issued by the OECD to eradicatetax havens and improve transparency and information exchange among its members. For this reason, the information that the SATreceives may be further provided to other countries’ tax authorities, subjectto an applicable international treaty.
Please contact us for any further information.
Contact Information:
Rene Cacheaux | rcacheaux@ccn-law.com
Joseph B. Newton | jnewton@ccn-law.com
Felipe Chapula | fchapula@ccn-law.com.mx
Jorge Ojeda |jojeda@ccn-law.com.mx
Miriam Name | mname@ccn-law.com
Iker Dieguez | idieguez@ccn-law.com
Natalie Ceron |nceron@ccn-law.com
Esteban Gomez Aguado | egomez@ccn-law.com.mx
Julieta Guzman | jguzman@ccn-law.com.mx
On February 13, 2022, Mexico’s Tax Administration Service (“SAT” per its acronym in Spanish) published communication 010/2022, detailing updates to the Internet Digital Tax Invoice (“CFDI” for its acronym in Spanish) applicable to the issuance of invoices, from version 3.3 to version 4.0. Based on such updates, it is important to consider, among others, the following changes:
a) It is now mandatory to include the name and tax address of both the issuer and recipient of the CFDI, and the purpose for which the CFDI will be used; and
b) Regarding payroll receipts, employees must provide their Taxpayer Registry Number (“RFC” for its acronym in Spanish) to their employers, along with their full name and postal code on file with the SAT, which employees may look up and review electronically.
With the purpose of improving the tax services and making compliance with tax obligations easier, the SAT granted a transitional term until April 30, 2022, to adjust to the new issuance of invoices and paystubs. During this interim term taxpayers may use both CFDI versions, 3.3 and 4.0.
Please contact CCN’s attorneys in case you require additional information.
Contact Information:
Rene Cacheaux | rcacheaux@ccn-law.com
Miriam Name | mname@ccn-law.com
Esteban Gómez Aguado | egomez@ccn-law.com.mx
On December 23, 2021 the State of Nuevo Leon published in the Official Journal for the State of Nuevo Leon Decree No. 037 amending key provisions of the Treasury Law for the State of Nuevo Leon including changes to Chapter Eight pertaining to the Payroll Tax (“ISN” – per its acronym in Spanish). Such changes include a new article 154-Bis increasing the scope of the ISN to include all payments carried out under the category of fees that are similar to wages, per the terms of article 94 of the Income Tax Law.
Chapter Eight already contemplated certain fees categorized as being similar to wages under the ISN (directors’ fees, services mainly rendered to one provider, among others). However, based on the amendment entering into force as of 2022, new types of payments not previously included will be taxed under the ISN, the most relevant being advance payments to members of companies and associations.
Therefore, there are reasonable legal arguments to protest the constitutionality of article 154-B of the Treasury Law for the State of Nuevo Leon entering into force as of January 1, 2022, as advance payments to members of companies and associations exceed the ISN’s original purpose.
In accordance with rules of Mexico’s Supreme Court of Justice, the amendment may be protested within (a) 30 business days following its entry into force, or (b) within 15 business days of the first ISN payment.
Contact Information:
Rene Cacheaux | rcacheaux@ccn-law.com
Miriam Name | mname@ccn-law.com
Jorge Ojeda | jojeda@ccn-law.com.mx
Jorge Sánchez Cubillo| jcubillo@ccn-law.com.mx
Eduardo Parroquin | eparroquin@ccn-law.com.mx
Esteban Gómez Aguado | egomez@cn-law.com.mx
The Department of Labor and Social Welfare (“STPS” per its acronym in Spanish) has announced that during the course of 2022 it will perform audits of companies to verify possible violations of the Federal Labor Law (“FLL”) in outsourcing matters. The STPS has created a new questionnaire containing 12 questions, which it will use to ensure companies’ compliance with outsourcing rules. The STPS will conduct a first evaluation using the Specialized Services and Works Provider’s Registry (“REPSE” per its acronym in Spanish) to identify any red flags.
Based on the above, it is vital for companies to comply with new outsourcing regulations. On this point, bear in mind that such regulations forbid the outsourcing of personnel for the entire workforce of a contracting employer company which shares the same or similar commercial activity of the outsourcing contractor.
Likewise, the amendments to the FLL allow the subcontracting of specialized services or works that are not part of the corporate purpose or main commercial activity of the company, only by contracting individuals or entities that render specialized services that are properly registered with the REPSE. Such registration must be renewed every three years, and specialized services providers are required to file periodic notices with the Mexican Social Security Institute and the National Institute for Employees Housing Fund.
The amendments also provide that in case of a provider’s violation of its labor, social security or tax obligations in connection with its employees rendering specialized services, the beneficiary company will be considered as jointly liable for all corresponding fines and penalties. Penalties for breach to the outsourcing regulations are: (i) a fine equal to 2,000 to 50,000 Measure and Update Units (UMA per its acronym in Spanish) (from $179,240.00 a $4,481,000.00 pesos), for carrying out the outsourcing of personnel without proper registration, at the authority’s discretion; and (ii) that tax invoices issued for unallowed personnel outsourcing services are considered without legal effect, and therefore expenses for such services would not be deductible for income tax purposes. Further, value added tax paid would not be credited.
The above information outlines why it is important for companies to verify their current and future contracts with service providers to avoid potential instances of non-compliance under new regulations.
Contact Information:
Pablo Saenz | psaenz@ccn-law.com.mx
Fernanda Magallanes | fmagallanes@ccn-law.com.mx
