MEXICO Law and Practice Contributed by: Ángel Escalante, Gabriel Rojas, Daniel Colunga and Brenda Favela, Escalante & Asociados
7. Administrative Co-Operation 7.1 Legal Framework for Administrative Co- Operation Mexico participates in a broad range of international legal instruments aimed at facilitating administrative co-operation in tax matters, including mechanisms for exchange of information, mutual assistance and co- ordinated efforts to prevent base erosion and profit shifting.
• imprisonment (three months to nine years); and • monetary fines. These penalties may be increased in the presence of aggravating circumstances such as: • failure to withhold or remit taxes that were col - lected on behalf of third parties; • the simulation of legal acts or transactions for tax purposes; and • the use of false invoices to reduce taxable income. In addition, Article 109 of the FFC regulates equivalent tax fraud offence, through which the same penalties applicable to tax fraud may be imposed on individuals who, for example: • report false deductions or reduce taxable income in tax returns; • improperly benefit from a tax subsidy or incentive; or • fail to file mandatory tax returns for more than 12 months when such returns are required to be filed on a final basis. 6.3 Interaction Between Tax and Criminal Procedures Pursuant to Article 93 of the FFC, when tax authorities become aware of facts that may constitute a criminal tax offence, they are required to notify the Federal Public Prosecutor’s Office and provide the documen - tation and evidence collected during the administra - tive proceedings. The investigation and prosecution of tax crimes there - fore fall within the jurisdiction of the Federal Public Prosecutor’s Office, while criminal penalties are imposed by the competent criminal courts. Impor - tantly, the Mexican legal system follows a principle of independence between administrative and criminal proceedings. Accordingly, tax audits and administra - tive determinations of tax liabilities are conducted independently from criminal investigations and pros - ecutions; therefore, one does not necessarily depend on the outcome of the other.
Most Relevant Instruments Multilateral Instrument (MLI) This aims to: • prevent the abuse of tax treaties;
• eliminate tax avoidance through treaty structures; • introduce measures designed to discourage BEPS practices; and • improve the efficiency of dispute resolution mecha - nisms. Double taxation treaties Most of these include provisions on exchange of infor - mation and administrative co-operation. The relationship between the MLI and bilateral tax treaties can be summarised as follows: (i) both instru - ments co-exist and share the same legal nature under international law; and (ii) where potential conflicts arise, they must be resolved through the interpretative mechanisms and conflict clauses established under treaty law. In practice, the application of international tax rules generally follows a three-step approach: • analysis under domestic tax law; • analysis under the relevant double taxation treaty; and • analysis under the MLI, where applicable. The Supreme Court of Justice has also clarified that the taxable events and tax rates applicable within the national legal system are established in domestic tax law, particularly the MITL. Accordingly, tax treaties do not create tax obligations, but rather determine which contracting state has the right to tax a given category
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