By: Andrea Mendoza Molina
As a result of the tax reforms that have taken place in recent years, the Mexican Federal Tax Code ("Código Fiscal de la Federación") was amended to incorporate a general anti-abuse rule.
There are two types of tax abuse rules: General Anti-Abuse Rules (GAAR'S). General Anti-Abuse Rules) and the specific anti-tax abuse regulations (SAAR's). Specific Anti-Abuse Rules).
These anti-abuse rules are aimed at preventing the use of schemes or transactions that are intended to evade taxes or avoid tax law. The specific anti-abuse rules seek to prevent specific transactions identified as abusive (limited to the cases provided for in the rule). On the other hand, the general anti-abuse rules are applicable to any transaction considered as abusive for tax purposes.
The implementation of general anti-abuse rules is a common practice at international level. Some countries and jurisdictions that have these rules are Australia, Belgium, Germany, Israel, Italy, Finland, France, the Netherlands, New Zealand, Canada, South Korea, Hong Kong, India, Ireland, Spain, Sweden, South Africa, and the United States.
In Mexico, Article 5-A was added to the Mexican Federal Tax Code to prevent certain taxpayers from continuing to perform legal acts or transactions in order to be in a more favorable tax position than other persons performing the same economic transaction.
This article of the Mexican Federal Tax Code, in general terms, establishes that legal acts that do not have a business reason and that generate a tax benefit, will have the tax effects that correspond to the legal act that would have been carried out to obtain an economic benefit reasonably expected by the person. In this regard, if the economic benefit of a legal act is less than the tax benefit, then the authority presumes that there is no business reason.
In conclusion, when a legal act (transaction) is carried out, all supporting documentation must be available to argue that such act was carried out for an economic purpose greater than the tax benefit obtained derived from such transaction, so that in the event of the exercise of verification powers by the authority, all the elements are available to prove the business reason for such legal act.
Source:
https://www.ppef.hacienda.gob.mx/work/models/PPEF2020/paquete/ingresos/LISR_LIVA_LIEPS_CFF.pdf
