Mexico puts an end to tax amnesties

May 20, 2019 saw the publication, in the Official Journal of the Federation, of the Decree annulling the decrees and various general provisions issued on the terms of article 39.I of the Federal Tax Code for the remission of tax debts, in order to put an end to the practice of tax amnesties, which the current government of Mexico considers detrimental to the public purse and to taxing justice.

To give some background, article 39.I of the Federal Tax Code grants the president of the Republic the authority to remit debt or release taxpayers, in full or in part, from the payment of taxes and ancillary charges, or to authorize their payment in installments or in part, in certain cases.

Accordingly, the new decree renders null and void the decrees or general provisions issued previously by the president of the Republic, through which tax debts were remitted, with the exception of:

• The Decree granting facilities for the payment of income tax and valid added tax, and partially remitting the first-mentioned for persons engaged in fine arts activities with works created by them, and facilitating the payment of taxes on the transfer of artistic works and antiques owned by individuals, published in the Official Journal of the Federation on October 31,1994 and its amendments; and
• The Decree granting tax benefits in relation to housing, published in the Official Journal of the Federation on January 22, 2015.

Moreover, the president of the Republic undertakes not to grant, through presidential decrees or any other statutory or administrative provisions, total or partial remissions of the payment of taxes and ancillary charges to large taxpayers and tax debtors, with the exception of some extraordinary cases, such as natural catastrophes.

It is clarified that the decree will take effect the day after its publication and will remain in force until fiscal year 2024.

Moreover, it should be noted that although this new regulation renders null the other decrees and provisions issued previously granting debt remission to taxpayers, the effects hereof will not affect the remissions granted in the past.

With these actions, the current government is making it clear that the elimination of tax debt remissions will result, in its opinion, in an increase in tax collection (although it also has a financial impact for the corporate and individual taxpayers in Mexico). However, we should not forget that such elimination also means a loss of tax collection in cases where tax disputes are resolved in favor of taxpayers, taking into account that the remissions have always been conditional on the taxpayer’s partially paying the debt and desisting from any defensive action it may have initiated.