Mexican State Finances and Tax Code

Posted on Dec 1, 2024 in Law & Jurisprudence

State Financial Activities

Meeting Public Demands

The State’s activities aim to meet public demands and provide services. This involves utilizing personnel, legal tools, and resources, leading to significant administrative exercises with economic implications.

Stages of State Financial Activity (Viti Di Marco)

  1. Revenue collection by state and public law bodies.
  2. Auditing raised revenue and managing assets.
  3. Covering expenses for public sector functions and services.

Financial Law

Financial law comprises public law rules regulating public authorities’ finances, including the State and self-governing entities.

Sections of Financial Law (Myrbach-Rheinfeld)

  1. Constitutional division of powers, budget adoption, tax law preparation, financial control, borrowing regulation, and property disposition.
  2. Organization of financial bodies, tax laws imposing obligations on private entities, and provisions for observing laws and individual resources.

Tax Code of the Federation

1.1 Birth of Tax Liability

Legal Basis: Article 31, Fraction IV, CPEUM

Obligations of Mexicans: Fraction IV

Contribute proportionately and equitably to public expenditures of the Federation, Federal District, and City or State of residence, as per legal provisions.

Classification of Contributions

  1. Taxes: Contributions required by law from individuals and corporations in specific legal or factual situations.
  2. Social Security Contributions: Contributions required by law for state-fulfilled social security obligations.
  3. Improvement Contributions: Established by law for individuals and entities benefiting directly from public works.
  4. Rights: Contributions for using or enjoying national public property and receiving state-provided services, except those from deconcentrated agencies. Also includes contributions by decentralized public agencies for unique state services.

Subject

Natural Person: Every human being with the capacity to enjoy rights and obligations. Includes children and the disabled, represented by guardians or those exercising parental authority.

Moral Persons: Corporations, decentralized agencies in business, credit institutions, societies, and associations.

Includes the Federation, States, and Municipalities when engaged in private activities, and foreign nations interacting with Mexico under reciprocity.

Tax Regimes

Moral Persons

  1. General Law
  2. Simplified System
  3. Consolidated Regime

Individuals

  1. Salaries and Wages
  2. Business and Professional Activity
    1. Small Taxpayers Regime B.1 AE
    2. Intermediate Regime B.2 AE
    3. General Law System B.3 AE
  3. Leasing

Art. 5: Tax provisions establishing obligations and exceptions for individuals, violations, and penalties are strictly applied. Burdens on individuals concern subject, object, base rate, or fee.

Other tax provisions are interpreted using any legal interpretation method. Absent explicit fiscal rules, federal common law applies if not contrary to tax law.

Contributions are caused by legal or factual situations and determined by laws at the time of causation. Later-issued rules apply, and taxpayers identify those responsible. Authorities determine this during investigations, with taxpayers providing necessary information within 15 days of accrual.

Infractions: Transgressions or breaches of law punishable by law. Requires prior legal description, declaration of illegality, and assigned penalty.

Time Limits: Derived from tax liability payment (fulfilling an obligation).

Saturdays, Sundays, and specific holidays are excluded from time limits. If the last day is non-business, the deadline extends to the next business day.

Elements of Contributions

  • Purpose: The taxable economic reality (e.g., income, wealth circulation, consumption).
  • Subject: Active subject (the State) and taxpayer (moral or physical persons).
  • Base: The amount taxed.
  • Fee: Spilled (distributed among affected subjects), fixed (exact amount per unit), proportional (fixed percentage), or progressive (increases with base value).
  • Payment Period: Time established by law to fulfill the obligation.

Powers of the Prosecutor – SAT (Article 42, Fraction III)

  • Home visit
  • Visitation order
  • Circumstantial minutes
  • Liquidation
    • Notification
    • Tax Credit Determination
    • Omissions
    • Presumption of crime
    • Warranty fiscal interest: Surety, bond, mortgage

Administrative authority sends to PGR (Attorney General’s Office), who files the complaint. This is an administrative procedure.

Judicial authority (District Judge) determines the sentence if there is no payment. Presumption of crime becomes a crime.

  • Causión (bail)
  • Indirect relief

Article 102: Smuggling Offense

Smuggling involves entering or removing goods from the country by:

  1. Omitting total or partial payment of contributions or duties.
  2. Lacking permission from the competent authority.
  3. Importing or exporting prohibited goods.

Smuggling also includes interning foreign goods from free zones without authorization or removing goods from bonded areas without proper auditing.

Tax Crimes (Article 92)

Formulation of complaint: The victim files a declaration of injury for smuggling.

Dismissal: Ending the affair by the authority.

Merchandise Concept

Commodities include products, articles, and any property, even those deemed inalienable.

Real home equity, land, water, etc., are assets of the nation.

Fraud and contribution crimes are federal offenses under the Congress, reported to the Federal Public Ministry.

Property tax is local, under local jurisdiction (local authority), collected by each municipality’s finance secretary.

Property tax applies to productive or agricultural land. Payment is triggered by alignment, brand, or territorial extension of real estate development.

Chapter II: Tax Offense

Article 92: Complaint Procedure

Criminal proceedings for tax offenses require:

  1. Filing a complaint for offenses under Articles 105, 108-112, and 114, regardless of administrative proceedings.
  2. Reporting potential injury to the Federal Treasury (Articles 102 and 115).
  3. Formulating a declaration for smuggling goods without tax payment, required permission, or involving prohibited goods.

Other cases require sufficient facts for the Federal Public Ministry.

Processes are suspended upon payment of contributions, sanctions, and charges, or if tax credits are guaranteed. This is at the Ministry of Finance’s discretion.

In fiscal crimes, the Ministry of Finance quantifies injury in the declaration or complaint for criminal proceedings. Bail (excluding serious crimes) includes this amount plus contributions, updates, and charges. Bail doesn’t replace the guarantee of tax interest.

Paying or securing tax interest allows bail reduction up to 50% if justified.

Prison sentences for tax crimes consider minimum and maximum fees at the time of the conduct.

Article 93: Reporting Tax Offenses

Tax authorities must immediately inform the Federal Prosecutor about probable prosecutable offenses, providing proceedings and evidence.

Article 95: Responsibility for Tax Crimes

Those responsible include:

  1. Arranging the crime.
  2. Performing the described conduct.
  3. Committing the crime jointly.
  4. Using another person as a tool.
  5. Inducing another to commit it.
  6. Helping another commit it.
  7. Assisting another after execution, fulfilling a promise.

Article 96: Covering Up Crimes

Those responsible for covering up include (without prior agreement or participation):

  1. Acquiring, receiving, moving, or hiding the object of the crime for profit, knowing its illegal origin.
  2. Helping the defendant avoid investigation or escape, concealing evidence, or securing the object’s benefit.

Covering up is punishable by three months to six years imprisonment.

Resource Revocation (Article 116)

An appeal for reversal can be lodged against administrative acts in federal tax matters.

Article 117: Revocation Proceedings

Revocation proceedings apply to:

  1. Final decisions of federal tax authorities:
    1. Determining contributions, accessories, or uses.
    2. Denying refunds.
    3. Setting customs authorities.
    4. Final resolutions causing offense to individual taxation (except Articles 33-A, 36, and 74).
  2. Acts of federal tax authorities:
    1. Requiring payment of allegedly extinct or lower-than-required tax credits.
    2. Issued in execution procedures allegedly not complying with the law.
    3. Affecting third-party legal interests (Article 128).
    4. Determining the value of seized goods (Article 175).