MEXICO Law and Practice Contributed by: Ángel Escalante, Gabriel Rojas, Daniel Colunga and Brenda Favela, Escalante & Asociados
In addition, taxpayers must comply with specific reporting obligations, including the filing of an inform - ative return in February of each year reporting income obtained from preferential tax regimes during the pre - ceding fiscal year. This approach is aligned with an effective taxation test rather than a jurisdictional blacklist. 5.4 Reporting Obligations and Disclosure Regimes National law combines traditional reporting obliga - tions with mandatory disclosure regimes designed to detect and prevent tax evasion and tax avoidance. Related-Party Reporting Under Article 76 of the MITL, taxpayers must maintain and submit information regarding transactions carried out with foreign related parties. Furthermore, Article 76-A of the MITL introduced the obligation to complete master file, local file and coun - try-by-country reports for certain multinational groups, in line with Action 13 of the OECD BEPS Project. Preferential Tax Regime Reporting As previously discussed, Article 178 of the MITL requires taxpayers to file an informative return in February of each year reporting income generated through preferential tax regimes during the preced - ing fiscal year, whether obtained directly or through foreign entities. Reportable Tax Schemes (Mandatory Disclosure Rules) Mexico also operates a mandatory disclosure regime for reportable tax schemes, established in Articles 197 to 202 of the FFC. Under this regime, certain tax arrangements must be disclosed to the tax authorities when they generate, or are expected to generate, a tax benefit in Mexico and exhibit specific characteristics associated with potential tax avoidance risks. Pursuant to Article 199 of the FFC, a reportable tax scheme is defined as any arrangement that produc - es or may produce a tax benefit in Mexico, and that
falls within a set of predefined characteristics, which among other things includes: • arrangements that avoid the exchange of financial information; • mechanisms to prevent the identification of the ultimate beneficiary of income or assets; • transactions involving loss transfers or the use of tax attributes to reduce the tax base; • hybrid or cross-border structures that generate double non-taxation; and • arrangements that recharacterise income or exploit mismatches in tax treatments between jurisdic - tions. Pursuant to Article 197 of the FFC, the obligation to disclose generally falls on tax advisers who design, promote, organise or implement the reportable scheme. However, pursuant to Article 198 of the FFC, the obligation may shift to the taxpayer in certain cir - cumstances, including when: • the adviser is not required to disclose; • the adviser is located abroad; or • legal privilege or confidentiality rules apply. Reportable schemes must be disclosed generally within 30 days from the date on which the scheme is made available or implemented, depending on the nature of the arrangement. 5.5 Role of Tax Authorities and Enforcement Measures Audit Powers Tax authorities may exercise audit powers to verify taxpayers’ compliance with tax obligations. These powers include: • on-site tax audits conducted at the taxpayer’s reg - istered tax domicile; • desk audits requiring the taxpayer to provide docu - mentation and information at the tax authority’s offices; and • electronic audits carried out based on information contained in the tax authority’s electronic data - bases.
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