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Mexico bylaw complicates verification of accounting operations materiality

On Dec. 6, 2019, Mexico’s Supreme Court approved bylaw 161/2019. The new bylaw gives faculty to Mexico’s tax authority, SAT (Servicio de Administración Tributaria) to require that all private taxpayer documents have a “true date” to be valid.

The objective of the true date bylaw is that the SAT can attest to the authenticity of private documents, avoiding fraudulent or malicious acts to the detriment of third parties. It looks to prevent fraudulent acts that can harm the agency’s collection efforts. These fraudulent acts could be the elaboration of contracts and documents between individuals that contain a false date or is pre-dated on purpose before an audit. By changing the date, the perpetrators can obtain a benefit and avoid responsibilities by mitigating the validity or effectiveness of certain legal acts. This creates a harmful effect on the agency’s collection efforts.

Companies operating in Mexico could be at risk of facing rejections from the SAT when they submit their documents to verify the materiality of their accounting operations. The tax authority could argue that those operations were non-existent and increase sentences in their favor. The Supreme Court ruled that for the tax authority to be effective on their collection and verification faculties, even though it recognizes that the true date requisite is not expressly stated in the tax legislation, all documentation that covers accounting acts or operations and has a tax effect must meet this requirement.

If you are an executive whose company is doing business in Mexico, directly or as a supplier, please contact us. We are happy to help you identify and reduce compliance risks.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

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