Over the years, the Tax Court in Mexico has undergone some changes; we speak to the Head of the Tax Litigation practice at SMPS Legal, Cristian Solis, who gives insight into the noticeable changes, tax disputes in Mexico and how to avoid litigation.
What would you say has been the biggest development to affect your work in tax litigation in Mexico over the last few years?
There have been several changes in recent years that deserve notice. The Tax Court has made strides in eliminating procedural traps and making the process of challenging the tax authorities’ resolutions more accessible, shortening the different procedural deadlines (which results in shorter cases) and implementing an expedited trial, as well as an option to file and follow the case online.
All the previous developments have benefited taxpayers and regained their trust in the justice system. Moreover, the creation of the General Taxpayers’ Attorney (Procuraduría de la Defensa del Contribuyente) has generated new and efficient ways to resolve differences with the tax authorities. Nevertheless, there is also bad news; the actual incarnation of the Mexican Supreme Court of Justice on the most part has turned its back on taxpayers and is more interested in favouring the Mexican Treasury, even if it results in contradicting or overriding previous legal precedents.
What do you find are the most disputed tax matters you deal with?
In recent years, the Mexican Treasury has initiated a very aggressive collection programme that involves goals that seem unsustainable. That resulted in an increase in audit procedures related with federal taxes and a change in the auditor’s approach. Since the performance of the auditors is linked to the tax assessments they impose, taxpayers are being levied with taxes that do not relate with the reality of the operation. That situation has triggered an increase in controversies, as well as an awareness from the taxpayers of the need to be advised during the audit procedure to avoid possible contingencies.
Who are the clients you regularly advise in regards to litigation?
Even though SMPS Legal is a boutique we are specialized and highly knowledgeable in a wide range of areas (e.g. tax, corporate, real estate, energy, M&A), therefore we have a broad spectre of clients that provide unique challenges. We have assisted clients involved in the food industry in recovering considerable amounts of value added tax, clients from the automotive industry in challenging tax assessments involving rejection of royalty payments, clients that have suffered seizures of assets resulting from foreign trade audits, etc. Even though some cases might appear similar, each and every one has its complications.
How do you help your clients best avoid litigation, in your tax consultancy work?
Being able to understand not only the tax implications of the operations that my clients are undertaking, but also the possible contingencies and the expected result if a litigation is needed, helps me in providing the best possible advice so that my clients can avoid any unnecessary contingencies.
I believe that in every situation ignorance leads to mistakes. Therefore, having an overview of the possible scenarios (including even those that could result in litigation and the probable outcome) is the best option when looking for the right decision.
If you had the power, would you change any Mexican tax or litigation regulations to facilitate your work in this segment?
Based on the new attitude we are seeing from the tax authorities, where they are more interested in imposing tax assessments than in investigating the truth behind the operation and whether the treasury suffered any harm, I would change the provisions that regulate the audit procedures. This would limit the auditor’s capacity to request inordinate amounts of information and to include a procedure involving a third party (possibly the General Taxpayers’ Attorney), that could determine whether the information requested by the tax authorities is needed and if the taxpayers are required to have it and provide it in the way it was requested, as in many cases, the tax authorities are requesting work papers and integrations that the taxpayer clearly does not need.
