TAX. Omission of tax measures by the Federal Executive Branch due to COVID-19 April 6, 2020
On April 5th, 2020 the Federal Executive Branch (FEB) issued a Report on the First Quarter of this year, basically focused on the health emergency caused by the coronavirus COVID-19; however, it did not announce a single temporary tax measure in order to protect and stimulate the Mexican economy, as well as to mitigate job-loss.
Although the FEB mentioned in such Report that the tax refund applications will be expedited, does not imply any tax measure or incentive, since it is an obligation of the tax authorities to refund the amounts unduly paid and those that proceed in accordance with the applicable provisions according with the article 22 of the Federal Tax Code (FTC).
On March 7th, 2020, the Amendment to the first paragraph of article 28 of the Mexican Constitution (MC) entered into force, with which the offsetting of taxes and tax exemptions were prohibited in the terms and conditions established by laws.
Previously, on May 21th, 2019, the Decree by which the Decrees and several general provisions issued in terms of article 39, section I of the FTC are left without any effect entered into force, by which of means tax debts were cancelled. This Decree will be in force until the year 2024.
Such Decree sets forth that only tax debts should be allowed to be forgiven when has been affected or tried to prevent from affecting the situation of any place or region of Mexico, some industry, production or sale of goods, or carrying out an activity, as well as in cases of catastrophes suffered by natural phenomena.
Article 39, section I of the FTC states that the FEB through general rulings may offset taxes or exempt it, totally or partially, the payment of taxes, its update-by-inflation, interests and fines, authorize its payment in deferred payments or in installments, when the situation of some place or region of the country has been affected or tries to avoid an affectation, an industry branch, the production or sale of goods, or the carrying out of an activity, as well as in cases of catastrophes suffered by phenomena meteorological, plagues or epidemics.
By the aforementioned provisions, we consider that the FEB is compelled to issue the necessary general rulings, either to offset or exempt, totally or partially, the payment of taxes and its update-by-inflation, interests and fines, or to authorize its payment in deferred payments or in installments, because the General Health Council published on March 30th, 2020 at the Official Gazette of the Federation (OGF), the Agreement declaring as a health emergency due to force majeure the epidemic of disease generated by the SARS-CoV2 virus (COVID-19) and the Health Minister published on March 31th at the OGF, the Agreement establishing extraordinary actions to address the health emergency generated by the SARS-CoV2 virus, ordering the immediate suspension, from March 30th to April 30th, 2020, of non-essential activities in the public, social and private sectors.
Therefore, before the FEB omission to issue general rulings stating tax measures on the occasion of the epidemic declaration caused by the coronavirus COVID-19, we consider that with the corresponding legal remedies such omission would cease, this is, for the FEB to issue the necessary general rulings to: (i) offset or exempt, totally or partially, the payment of taxes and its update-by-inflation, interests and fines; and (ii) authorize its payment in deferred payments or in installments, so that human rights and fundamental principles sets forth on the MC would no longer be violated.
If you have any questions regarding the foregoing, please do not hesitate to contact us.
Mexico City, April 6, 2020