After receiving a partial or total negative decision from the Tax Court on the tax notice, taxpayers have fifteen working days to apply for amparo. These documentation requirements are difficult to meet after the transaction, so it is strongly recommended that Mexican residents be aware of these documentation requirements before entering into these types of agreements in order to prepare a timely act of defense. In addition, Article 76-A was introduced to align with Action Plan 13 on the filing of annual tax returns, which are similar to the OECD recommendations for a local file, a master file and a country-by-country report. The final rules also specify that the information contained in the local record constitutes evidence of compliance with the arm`s length principle. In addition, taxpayers who have concluded an APA with the SAT covering one or more intra-group transactions and maquiladoras who have opted for an APA cannot submit the relevant information with the local file. Once the tax notice has been notified to the taxpayer, he has 30 working days to lodge an administrative appeal. This defence provides taxpayers with a last resort to provide additional information to that already provided during the audit process. From 2016 to ITL 2021, local information returns had to be submitted to the tax authorities by December 31 of the following year. As a result, the ITL 2022 update will create significant challenges for taxpayers and transfer pricing advisors in Mexico, as this update speeds up the process of filing this tax return by more than seven months. In 2016, an update to the ITL was made to include the three-tier requirement introduced by BEPS (local file, master file and country-by-country reporting) for taxpayers who had typically reported in their annual tax returns in the previous tax year taxable income of MXN 904,215,560 (approximately US$45 million) or more – adjusted annually for inflation – and transactions with related parties. This obligation is in addition to the annual transfer pricing compliance report.
In addition, the ITL specifies the conditions for compliance with the simultaneous transfer pricing documentation, which must be established and maintained annually by the taxpayer. In general, this concurrent transfer pricing documentation does not have to be submitted to the tax authorities; However, it may be requested in the context of a tax audit procedure. In addition, there is a special article in the ITL that treats all expenses of related parties residing abroad allocated to a Mexican company proportionately considered a non-deductible item. There are certain documentation requirements that a Mexican company can create and obtain in order to consider these types of expenses as deductible, which are described in detail in section 4.3 Cost-sharing and contribution agreements. With respect to transfer pricing information reports (local file, master file, and country-specific reporting) set forth in Section 76-A of the ITL, the penalty for non-reporting, erroneous filing, mismatching, or reporting in a form other than that specified in the tax regulations is between MXN 172,480 and MXN 245,570 (approximately USD 8,600-12,250) in fiscal year 2022. ← 3rd Peer Review of Mexico 2017-2018 included a general oversight body with respect to the processes that would allow Mexico to take appropriate action if informed by another country that that other country has reason to believe that an error may have resulted in incorrect or incomplete reporting by a reporting entity or that a reporting entity has not complied with its obligation to submit a CBC report. does not comply. This oversight body remains in place.
In addition, the President of the Supreme Court examines whether the requirements of meaning or transcendence are met, which means that if the decision challenged by the taxpayer involves the omission or opposition of a judgment upheld by the Supreme Court on a constitutional question, or if there is a question of constitutionality that could lead to the creation of a new criterion of relevance, The appeal is likely to be allowed. This three-step requirement for transfer pricing documentation is implemented by the obligation to file informative tax returns containing information similar to that proposed in Action 13 of the Base Erosion and Profit Shifting (BEPS) project published by the OECD, consisting of a local file, a master file and a country-by-country report. In this context, it is specified that a country-specific information return must be submitted by taxpayers if they fall into one of the following categories. Section 76-A of the ITL states that taxpayers who reported taxable income on their annual tax returns pursuant to FTC Section 32-H (MXN 904,215,560 for fiscal year 2022; approximately $45 million) in the previous fiscal year and who have engaged in related party transactions must file the following information returns.