Mexico presents the 2022 Financial Package

On September 8, 2021, the Ministry of Finance and Public Credit presented before the Chamber of Deputies the so-called Economic Package for 2022. The plan includes several initiatives that will be submitted for discussion and legislative approval by the Mexican Congress. Among them, the initiative to reform, add and repeal various provisions of the Income Tax Law, the Value Added Tax Law, the Production and Services Tax Law, the Federal Tax Code and the Federal New Automobile Tax Law, in order to combat practices that have been described as tax evasion, as well as to increase tax collection without creating or increasing taxes, stands out.

Among the most important proposals in this area, the following are worth mentioning:

In the matter of ISR:

Henceforth the “business reason” will be a fundamental requirement to have access to various tax benefits, such as the disposal of shares “at tax cost”, the deferral of ISR payment derived from restructurings and in the case of mergers and spin-offs.
New requirements are proposed for the legal representation of foreigners, deduction of interest under the thin capitalization rules and the deduction of bad debts, as well as new limitations to amortize tax losses in mergers and spin-offs.
With respect to uncollectible accounts, it is proposed that the deductibility of such accounts may not be made until the corresponding legal and judicial procedures have been exhausted and a favorable resolution is obtained.
Regarding transfer pricing, it is proposed to eliminate the application of APAs for maquiladoras, leaving the “safe harbor” as the only applicable instrument in these cases.
It is also proposed the inclusion of new simplified regimes called “de confianza”, one for corporations with annual income of up to 35 million pesos, to be taxed according to cash flow, and another for individuals with annual income of up to 3.5 million pesos, who would be taxed according to progressive fixed rates calculated on their income, thus replacing the RIF.
It is also proposed to consider as taxable income the value of the usufruct rights determined in the appraisal to be performed at the time of consolidating the bare ownership and usufruct of a property. In these cases, notaries, judges and other notaries must inform the tax authority of the details of the transaction.
On the other hand, the annual depreciation rate for fixed assets related to constructions in mining lots will be reduced to 5%.
Regarding Value Added Tax:

In the case of taxpayers that carry out activities not subject to the VAT Law, it is proposed that these cannot credit the tax paid to suppliers or in the importation of goods, when they are related to such activities.
It is proposed to establish as a requirement for the creditable VAT generated in pre-operating periods, to inform the tax authorities in the month in which such activities begin.
On the other hand, it is proposed to define that the concession of temporary use or enjoyment of a tangible good is considered to be carried out in national territory when its use or enjoyment occurs in such territory, regardless of the place of its material delivery or the celebration of the legal act that gives rise to it.
Federal Tax Code:

It is proposed to add new cases of alienation to the case of mergers and spin-offs.
It is contemplated to reincorporate the obligation to report financial statements to taxpayers with income over 1,637’320,540.00 pesos.
The migration of tax residence to low tax jurisdictions is limited.
It is proposed to add a new assumption for the suspension of the expiration terms for the tax authorities to determine obligations.
Also, several adjustments and new requirements are proposed for the issuance of CFDIs, filing of notices of change of partners or shareholders, for the notice of cancellation before the RFC and in relation to the procedure itself to cancel CFDIs.
New cases of joint and several liability are added.
It is proposed that when a mutual agreement procedure provided for in international treaties is requested, the tax interest must be guaranteed.
Finally, the proposal to establish a new 12-month term limit for the execution of conclusive agreements, as well as new controls and penalties for activities related to the hydrocarbons sector are also included.
It should be remembered that these reforms must be discussed and approved by both the Chamber of Deputies and the Senate so that, once approved, they return to the Federal Executive Power for their promulgation and publication in the Official Gazette of the Federation.