Transcript Hector Silva, Tax Partner and Blanca Montano Rique, from Deloitte

SAT extends the period of
restructuring to maquiladoras
Héctor Silva
August 2014
Restructuring to maquiladoras
New Rules
 On July 4, 2014, the Second Amendments to Miscellaneous Tax Resolution for 2014
and its Annexes 1, 1-A, 2, 3, 6, 11, 14, 15, 18, 22, 23 and 24, were published in the
Official Gazette.
 An extension for maquiladoras to restructure their operations and meet the requirement
that the income from their productive activities is derived exclusively from maquila
operations is included in these rules.
 Also provisions applicable to maquiladoras to mitigate some of the adverse effects
introduced in the Income Tax Law and Miscellaneous rules are included.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Restructuring to maquiladoras
Income Tax Law
The Income Tax Law tightened the requirements for a company to qualify as a maquiladora
for purposes of income tax and allow to prevent the foreign contractor to establish a
Permanent Establishment, and also reduced the benefits for maquiladoras.
The requirements under the income tax law include:
 A maquiladora must earn all of its revenue from their productive operations
exclusively maquila activities.
 The goods subject to processing by the maquiladora must be temporarily imported and
subsequently exported (either physically or through the virtual program exports) once
the maquila services are completed. Switching to a permanent importation will eliminate
the PE protection.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Restructuring to maquiladoras
Income Tax Law
 The foreign residents that celebrate the maquila services contract agreement must
provide at least 30% of the M&E used in the maquila operation.
 And that M&E should not have been owned (currently or previously) by the maquiladora
or Mexican related party. (Maquiladoras that operated under the maquila regime prior to
December 31, 2009 were granted an extension of two years to meet the requirement of
30%).
These recent changes are the result of the continuous process of negotiation by the
Association of Maquiladora Export Industry (INDEX) with the tax authorities.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Restructuring to maquiladoras
Maquila services
The income tax law indicates that for a company to qualify as a Mexican maquiladora and
be eligible for special regime (including PE protection for the foreign contractor), all
revenues from their productive activities must come exclusively from the export of services
maquila;
Income shall be considered to result exclusively from the export of such services if it is
derived from the provision of maquila services (or income related to such services).
The Miscellaneous rules published on April 30, 2013 established a deadline of June 30 of
2014 to restructure or segregate their activities of non maquiladora services income.
Meanwhile, all revenues qualify as income derived exclusively from their maquiladora
activities, provided accounting records will enable to differentiate each type of income. (and
the costs associated with each type of income)
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Restructuring to maquiladoras
Extension of the deadline to segregate national market sales
 Maquiladoras have faced many challenges in restructuring its operations and segregate
their sales to Mexican customers within the short period of six months granted by the
rules December 2013.
 As a result, tax authorities extended the deadline for restructuring / segregation to
October 1, 2014 the extension will be granted if the continuous maquiladora maintaining
accounting records to differentiate each type of income and the cost associated with
such income.
 However, from 1 October 2014 maquiladoras must meet the requirement that all of the
income from production activities derives from its maquila operations.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Restructuring to maquiladoras
Maquiladora income
The new rules also clarify that the revenue from their productive activities include income
for services of personnel, lease / sale of land and building, interest, sale of the waste
materials that arose in their production activities and other maquila income related to
operation, provided they are different to those obtained for the sale and distribution of
products.
This arrangement would apply only if the following conditions are met:
 That the sum of revenues described above (excluding linked from the sale of land and
building) as a whole does not exceed 10% of the total amount of revenue from its
maquila operation.
 That segments in the accounting the information corresponding to the maquila
operations and other related activities and identify each of the costs.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Restructuring to maquiladoras
Maquiladora income
This arrangement would apply only if the following conditions are met:
 That if such transactions are conduit with related parties, compliance with Transfer
Pricing regulations are met.
 That the corresponding information be reported in the informative statement "DIEMSE"
corresponding to these revenues, disaggregated information for each item.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Restructuring to maquiladoras
Maquiladora income
The addition of these miscellaneous rules also makes the following clarifications:
 In the case of revenue from the sale of immovable property, the maquiladora company
must give notice by writing to the Free Central Management Transfer Pricing Control,
exposing the business reason that gave rise to such action, and indicate the amount and
percentage this operation represents to the total revenue of maquila services, also
relevant documentation and evidence that the goods where used in the maquila
operation must be provided.
 The revenue from the provision of personnel services, must come exclusively from
related parties of the maquiladora.
 As for the revenue derived from rents obtained from unrelated parties, the maquiladoras
have a maximum period of three years from the date of commencement of such
contracts to end this operation,. This timeline does not apply if any leases held prior to
January 1, 2014 in which a longer period is contemplated to above, in no case it may
extend the term of such contracts.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Restructuring to maquiladoras
Maquiladora income
 The maquiladora can not apply the Safe Harbor or APA option to cover any of the
revenue from these extra-maquila activities.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
New Rules
 As of July, 2014 there is an obligation to upload accounting information into the SAT’s
webpage via the Tax Mailbox for:
• Taxpayers obligated to keep accounting records, shall keep the records in an
electronic system with the ability to generate XML files.
• Except those who register their operations in the electronic tool "Mis Cuentas“(small
taxpayer who cannot afford their own software may use the authorities bookkeeping
tools in “Mis Cuentas” – in other words they may keep their accounting records on
line with the authorities platform),
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
XML files to generate
 Chart of accounts used in the period.
• This chart will be added a field with the grouping code of SAT´s accounts contained
in Annex 24.
 Trial Balance including beginning balances, movements of the period and ending
balances of all and each of the accounts of assets, liabilities, P&L accounts, capital and
memorandum accounts.
• In the case of the balance of the year end, it shall include the information on
adjustments that are recorded for tax purposes.
• All taxes should be identified, by rates, fees and activities not levied for tax
purposes; as well as transferred tax actually collected and creditable taxes actually
paid in accordance with Annex 24.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
XML files to generate
 Information of the journal entries, including transaction detail, account, subaccount and
item, as well as its auxiliary reports.
Journal entry
In each journal entry:
 It must be possible to distinguish the CFDI supporting the various transactions;
 It should also be possible to identify the different tax rates and activities not levied for tax
purposes.
 In operations with related third parties, the tax ID number (RFC) shall be included in
accordance with Annex 24, paragraph D.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
Compliance with the monthly provision of accounting records in electronic media
Taxpayers obligated to keep accounting records, except those who register their operations
in the electronic tool “Mis cuentas” should share it through the Tax Mailbox in accordance to
the following periods:
 The chart of accounts as specified in the applicable rule.
• Provided once in the first delivery and subsequently each time the chart is modified.
 Monthly, in the month immediately after the corresponding data, relative files to the trial
balance, as follows:
• Legal entities, by the 25th of the following month.
• Individuals, by the 27th of the following month.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
Compliance with the monthly provision of accounting records in electronic media (2)
 The file corresponding to the year-end information in which the adjustments are included
for tax purposes:
• Legal entities, not later than April 20 of the year immediately following.
• Individuals, not later than May 22 of the year immediately following.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
Start of the obligation to provide the accounting records through Tax Mailbox and its
provision at the request of the authority
 These obligations will be applicable to the legal entities from the month of July 2014;
 Notwithstanding the foregoing, information of the trial balance concerning the months
from July to December 2014, should be uploaded during January 2015 (according to
the draft of the third amendment to the Miscellaneous Tax Resolution, no official
publication has been made)
 However the information corresponding to the chart of accounts must still be
provided to the authority by October 2014.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
Recommendations
 Debug the chart of accounts (delete accounts that are not used or revise the accounts
names)
 Revise that the journal entries comply with all requirements
 If records are not conducted in Spanish, change the language
 Register e-mail accounts at the Tax Mailbox
 Assign a person responsible for checking e-mail in the tax Mailbox
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
Unconstitutionality of the monthly provision to SAT of the electronic accounting
records through the Tax Mailbox
From a legal point of view, the obligation to make available to the authorities the accounting
records in electronic media has far-reaching implications, both the private nature of the
information to be provided to the tax authority and the surrendering of information not
following the parameters established by the Constitution, as well as the administrative
burden implied, which should be properly regulated from the law itself.
These issues could be subject to constitutional scrutiny through an Injunction (Amparo)
trial, so that the Judicial Power of the Federation, decide whether or not the procedures
departs from the fundamental rights under the Constitution.
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Accounting records in electronic media
New Obligation
Unconstitutionality of the monthly provision to SAT of the electronic accounting
records through the Tax Mailbox
These issues could be subject to constitutional scrutiny through an Injunction (Amparo)
trial, so that the Judicial Power of the Federation, decide whether or not the procedures
departs from the fundamental rights under the Constitution.
The Injunction Trial has a limit of presentation of 15 business days after the day of which
the information was presented or when the deadline was met. (In the case the presentation
of the chart was on October 31, the 15 business days will be completed on November 21).
© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C.
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Héctor Silva Rodríguez
Tax Partner
011 52 (664) 622 7840
[email protected]
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