Chevez Ruiz Zamarripa > Mexico City, Mexico > Firm Profile

Chevez Ruiz Zamarripa
Vasco de Quiroga No. 2121, 4th Floor
Col. Peña Blanca Santa Fe
01210
Mexico

Mexico > International trade and customs Tier 1

Operating in perfect harmony with the firm’s revered tax department, the international trade group at Chevez Ruiz Zamarripa assists clients with a variety of matters, including tariff classification of goods for import or export; customs valuation, restrictions and non-tariff regulations; audits by tax or customs authorities; the analysis of legal risks in the supply chain, and for litigation against acts and decisions made by the tax and customs authorities – a segment where the practice has considerable prowess. Guillermo Sánchez Chao, a skilled litigator with solid knowledge of the maquiladora industry; and Ricardo Romero, who is well-versed in commercial remedies -antidumping, subsidies and safeguard procedures- as well as regulatory affairs related to imports and exports, co-head the practice. Eduardo Díaz, who focuses on free trade agreements, World Trade Organisation agreements, defence against unfair trade practices -dumping and subsidies-, and antitrust; and Gerardo Canseco (maquila operations, tariff classification/customs valuation, FTAs, contractual supply chain and antidumping procedures), are other names to note. Former fellow partner Jorge Sánchez joined Deloitte Impuestos y Servicios Legales, S.C.  in January 2022. Since reseach concluded, Díaz has moved to AGON - effectice as of October 2022.

Practice head(s):

Guillermo Sanchez; Ricardo Romero

Work highlights

  • Prepared and submitted an antidumping investigation petition on behalf of IDESA, as a domestic producer of triethanolamine, against imports of the same product from the United States.
  • Through litigation, defended the interests of a company due to the imposition of a tax credit for the importation of certain equipment applying tariff preferences in accordance with NAFTA, obtaining a favourable result for the company.
  • Advised a company during an audit initiated by the Mexican tax authorities regarding five fiscal years.

Mexico > Tax Tier 1

One of the undisputed market-heavyweights in Mexico's tax sector, Chevez Ruiz Zamarripa houses a sizable practice comprised of both lawyers and accountants, and which covers a range of tax and legal services including tax advisory work on international taxation (including transfer pricing and double taxation), and advice on tax structures for corporate transactions. The ‘excellent team’, which earns praise for always bringing ‘new and innovative ideas’ to the table, boasts strong national and cross-border experience; clients can also benefit from the firm's Madrid desk. Manuel Sáinz, a skilled tax litigator with a solid track record representing companies and individuals against the actions of the tax authorities, heads the practice. Other key practitioners (all operate from Mexico City unless otherwise stated) include Ricardo Cervantes, who specialises in consulting, dispute resolution and tax strategies both nationally and internationally; Pablo Corvera, who offers a broad array of advisory services, including international taxation, tax audits, tax compliance, tax planning and strategy, direct and indirect taxes, and transfer pricing; Monterrey-based Ramón Orendain, who focuses on legal defence strategies in high-profile tax and administrative matters; César Fares, who is particularly adept at handling audits for clients from the mining industry; and Yoshio Uehara, who focuses on tax and transfer pricing advisory and consulting. Tax and administrative litigator, César de la Parra, who leads the firm’s anti-money laundering practice; Eugenio Franzoni  (tax and administrative litigation) in Queretaro; and Rodrigo Ferias, who specialises in tax consulting and litigation related to local taxes, are other names to note.

Practice head(s):

Manuel Sainz

Testimonials

‘The people of the team move as a single entity, perfect coordination, timely support, with excessive patience and understanding of the problem.’

‘Their technical knowledge is outstanding, but especially the security they convey is highly appreciated.’

An excellent team. In tax matters they are experts in technical, practical and litigation matters, they always bring new and innovative ideas that give confidence, certainty and security to our company.’

I would highlight Pablo Corvera and his team.’

Key clients

Primero Empresa Minera

Kellogg Company Mexico

Sika Mexicana

Work highlights

  • Represented Primero Empresa Minera in a series of complex tax matters.
  • Advised in the corporate reorganisation of the eight entities under which Kellogg Mexico operates, as well as the reassignment of job functions for nearly 3,000 employees.
  • Advised Sika Mexicana regarding the acquisition of 100% of the shares issued by Bexel Internaciona, in relation to the due diligence on income tax, value added tax and social security contributions of Bexel and two subsidiaries.

Mexico > Wealth management Tier 1

Hailed as an ‘undisputed leader’ in this domain, Chevez Ruiz Zamarripa renders services to a variety of players, including individuals, financial institutions and trustees, assisting them with the fulfilment of their tax obligations, as well as with the implementation of investment and legal structures both in Mexico and abroad, in compliance with the provisions of the applicable tax and legal regulations. Leading the practice is Alfredo Sánchez, who is regarded by clients as ‘one of the best tax experts in Mexico’, and boasts over three decades’ experience advising clients in connection with all aspects of domestic and international estate planning and succession matters for individuals, trusts and estate administrators. Younger parter Ana Sofía Ríos, whose expertise encompasses Mexican trust formation, holding companies, donations, planning for retirement and disability, governance and succession planning for family-owned businesses, transactions involving private investments and residential real estate in Mexico, is another key member of the group.

Practice head(s):

Alfredo Sanchez Torrado

Testimonials

Chevez Ruiz Zamarripa is an excellent law firm that combines legal and accounting practices like few others. Their opinions are always very accurate and with a great legal/fiscal foundation. An undisputed leader.

Alfredo Sanchez Torrado is, without a doubt, one of the best tax experts in Mexico. He is very thorough in his analysis. He has extraordinary practical experience. He has a great understanding of the offshore world and international banking regulations.’

Key clients

JP Morgan

Citibank

UBS

Credit Suisse

Julius Ber

Bank Safra

BNP

Santander

Morgan Stanley

Work highlights

  • Advised a family on trust setup for next generation and family protocol.
  • Advised a client on preimmigration and change of tax residency due to relocation to another country.
  • Advised a client on the setting up of Mexican fideicomiso (trust) for asset protection and smooth transfer of assets to the next generation.

Mexico > Labour and employment Tier 3

Chevez Ruiz Zamarripa‘s labour and employment practice is hailed for having a team that is ‘always willing to participate and get involved with the business needs and understand the brand to be able to think of solutions outside the box and run the extra mile with their client’. The team has expertise in a wide range of employment, benefits law and social security matters, including corporate restructuring, employment terminations, collective bargaining agreements, litigation, PTU, and companies’ soft landings, as well as providing day-to-day advice to leading industry players at a local and international level. The practice is led by Rafael Vallejo who has considerable experience of labour restructuring processes, the employment termination of high-level officers, individual and collective labour negotiations, and labour and employment due diligence procedures; he has also supported clients with the employment and social security component of cross-border M&A transactions. Fellow partner Mayeli Cabral is an expert in labour risk management, and handles consulting, preventative work and litigation; while senior associate Miguel Ángel Cantú undertakes consultancy on both individual and collective labour matters. Since research concluded, however, Vallejo has left the practice – effective as of August 2022.

Testimonials

‘I think it’s a super diverse team always willing to participate and get involved with the business needs and understand the brand to be able to think of solutions outside the box and run the extra mile with their client. Their way of invoicing is super clear and transparent.

‘Their attitude, their permanent disposition, they feel like part of the company and they don’t treat you like just another client, offer solutions out of the box disposition and good attitude, the way to land complex issues to an international group in a simple way. After working with several renowned firms, I believe that this is the firm that is facilitating the entry of a large multinational into the country at such a controversial time of great change.

‘They have a robust team at the national level that allows complex issues to be resolved in a very practical way through excellent coordination.

‘The practice stands out in technical knowledge, support and immediate attention and the synergy that exists between the labor and tax areas, which results in robust and very practical opinions. Juan Soto stands out for his disposition and technical knowledge, who also has the best attitude to quickly resolve the issues that arise.

‘It is a strong team with good experience in labor matters. Rafael Vallejo is a lawyer with a lot of knowledge and presence in the market. They relate professionally with other firms. Being on a well-known platform in tax matters, they are in contact with clients and important issues.

‘Rafael Vallejo is the differentiator, not only because of his experience and knowledge, but also because he is very active in the market. Rafael has managed a good team in the offices of Mexico City, Querétaro and Monterrey.

‘It is a totally expert team in its field. Extremely reliable and with professionals who know how to provide personalized service.

‘They are expert lawyers who know how to communicate complex issues at all levels of the company. They are professionals who transmit reliability and know-how to support their clients. They handle sophisticated issues without complication.

Key clients

Siemens

Femsa

Etsy

IKEA

H&M

Logitech

Jabil

IBM

Vanguard

Kellogg

Work highlights

  • Advised on Etsy’s soft landing in Mexico, including the elaboration of internal policies, stock-related benefits, the profit sharing strategy, and advice on hiring strategy, among other labour compliance matters.
  • Advised on IKEA’s soft landing involving the review and elaboration of new policies that comply with the Mexican legislation, in accordance with IKEAS’s values and brand, along with the negotiation of a collective bargaining agreement applicable to the company.
  • Advised Siemens on the elaboration and implementation of a restructuring strategy in order to comply with the new outsourcing regulations and prohibitions in Mexico, as well as on the registration of certain entities as specialised service providers and analysis of the potential merger of certain entities.

Mexico > Compliance Tier 4

Chevez Ruiz Zamarripa is developing a robust compliance practice that is increasingly sought out by clients -mainly public companies and those in the mining, retail, financial services, infrastructure and energy sectors- for its expertise identifying vulnerabilities in terms of AML regulations (and the obligations that could arise as a result), as well as for its capabilities carrying out the implementation of corrective and preventive measures. César de la Parra leads the firm’s anti-money laundering practice and brings over 20 years’ litigation and dispute resolution experience to the table. He is closely supported by Diego Marván, who was promoted to director in January 2022 and has built up solid experience managing procedures related to anti-money laundering compliance verifications, as well as carrying out several corporate governance, compliance, anti-money laundering and anticorruption due diligence processes, and the drafting of policies and programs to comply with Mexican laws.

Practice head(s):

César De la Parra

Testimonials

We recognise the diversity of areas, topics, or fields of expertise that Chevez’s team masters and that allow them to give better advice to their clients by having different views on the same subject. We recognise the response time and the quality of the deliverables of the services they provide.’

Diego Marvan stands out for his depth of analysis, his broad experience but at the same time his quick response time.’

Mexico > TMT Tier 4

Chevez Ruiz Zamarripa‘s telecoms team is made up of practitioners who are ‘well-versed, prepared to tackle any challenge, and overall great people to work with’. The group is led by Valentín Ibarra, whose practice is mainly concentrated on consulting and litigation on technology, fintech and tax matters, with particular specialization in the digital economy sector, be it for domestic or international clients. Recent highlights include analysis, advisory, implementation and legal registry of numerous technology companies in México, such as global search engines, digital platforms, entities that operate shared-economy business models, software and hardware companies, and telecom and media companies, among others. Ana Sofía Ríos and director Gloria Niembro are other names to note.

Practice head(s):

Valentín Ibarra

Testimonials

They are well-versed, prepared to tackle any challenge, and overall great people to work with. They are responsive, and “have your back” in emergency situations.’

I can attest of Gloria Niembro and Ana Sofia Rios´s hard work and dedication to their clients. I really valued their expertise and also their practical approach to solving issues. I enjoy working with law firms that push the limit and truly guide clients to find the most creative solutions to any matter.’

Knowledge of the subject matter is evident and gives confidence in decision making.’

Extremely friendly, attentive, and with patience to understand the problems.’

Key clients

Bitrus

Klu

AFICO

Alianza por el valor estratégico de las marcas

Flink

Work highlights

  • Advised Bitrus on the design and creation of the model of its cryptocurrency exchange.
  • Advised Klu on the design of its operating technology model and the incorporation of its business entity, supporting it during the authorisation process before the National Banking and Securities Commission.
  • Participated in the lobbying process carried out before the Mexican Ministry of Finance in order to improve the financial technology regulatory framework.

Mexico > Corporate and M&A Tier 5

Chevez Ruiz Zamarripa’s corporate and M&A practice is a recently established but fast-growing practice at the tax powerhouse. The ‘excellent team of lawyers’ -which works in close collaboration with the firm's core tax department- is led by Miguel Valle, whose extensive experience in the transactional space encompasses advising clients on domestic and cross-border transactions such as M&A, joint ventures, strategic alliances, shareholders controversies and corporate restructurings. In addition to Valle, Jimena González De Cossío, who earns praise for her ‘attention to detail, and innovation in structuring contracts’; Ana Sofía Ríos, who also advises on corporate governance and regulatory compliance matters; and Fernando González, who was raised to the partnership in December 2021, complete the core practice group. Skilled associate Isabel Núñez is also noted.

Practice head(s):

Miguel Valle Salinas

Testimonials

Excellent team of lawyers. We have been working with this same team for almost 5 years now and have always seen excellent service, but also an evolution and sophistication to match our business.’

Our partner is Jimena Gonzalez de Cossio, who has handled a large part of our business. Some of her qualities are attention to detail, innovation in structuring contracts, as well as closeness and being able to take care of the client.’

The team knows how to communicate and use their resources effectively. They are experts in the field, which makes them reliable. They handle sophisticated issues very well and explain them clearly to all levels of the organisation. They understand the level of urgency and provide timely responses.’

They are very prepared and professional lawyers, with a high level of responsibility and communication. They are close to their clients, offering a personalised service.’

Key clients

International Paper

Interpublic Group

Houston Football Holdings

Stretchline

Promecap

Siemens Healthcare

Smurfit Kappa

Linklaters

Vidanta

Gilbane Alberici

Work highlights

  • Advised International Paper on its corporate restructuring in Mexico in order to comply with the labour law reform regarding outsourcing compliance.
  • Assisted DD3 Capital Partners with the structuring and formation of a new hedge fund (DX3) focused on financing and investment opportunities in Mexico.
  • Advised Aralpa Capital in connection with its investment in a real estate fund that will focus on the development and operation of a luxury hotel and residential project under the Four Seasons brand in Caye Chapel, Belize.

Mexico > Intellectual property Tier 5

Chevez Ruiz Zamarripa is praised by clients for fielding a team that is ‘well-versed, practical, quick to respond, receptive to feedback, and just overall amazing people to work with’. With experience in trade mark registration and prosecution, infringements, licensing and litigation, the team is led by Gloria Niembro, who is appreciated for ‘always going the extra mile in all projects’; her practice focuses on intellectual property consultancy and litigation, including trade marks, copyright and trade secrets, as well as expertise in enforcing intellectual property rights before the courts.

Practice head(s):

Gloria Niembro; Manuel Sainz

Testimonials

‘They are well-versed, practical, quick to respond, receptive to feedback, and just overall amazing people to work with. I highly recommend them.

‘Associate attorney Gloria Niembro has a proven track record in the international field, having practiced IP in the US, which is very rare in other law firms in the country.

‘Communication and knowledge is what makes them unique, there is a perfect synchronization that meets all clients needs.

‘Gloria Niembro always goes the extra mile in all projects, I am sure that the management and leadership of her area in the firm will only bear great fruit.

‘The team is extremely thorough in ensuring the accuracy of all of their client details. They assess a problem at all angles to advocate for a client.

‘I find that the team shows a very strong commitment defending client’s interests. We have been able to talk with them from our perspective of a company led by LGBT+ members and they have shown great openness to understand our personal needs from the professional trench. They are a team that generates trust.

‘The service is extraordinary as well as the level of personalization and attention to detail.

‘The quality of the service, always with promptness, clarity in the explanations and a professional and respectful treatment. Unlike other firms, the head of this team is a woman, which is very nice to see in the PI guild.

Key clients

Krypto Spirits

Individual entrepreneurs

Flink

Work highlights

  • Advised Krypto Spirits regaring the authorisations required for operating a Tequila business from an IP and regulatory legal standpoint, as well as assessment regarding the importance of securing a trade mark registration both in Mexico and the territories where the tequila will be sold.
  • Advised IT Burgers start-ups in trade marks registrations in Mexico and other jurisdictions from the very earliest stages.
  • Advised digital financial start-up, Flink, on securing the IP key component of the operation’s licensing and work-for-hire agreements that allows the client to have full ownership of IP assets.

Chevez Ruiz Zamarripa is a leading tax and legal firm in Mexico, known worldwide for its expertise in high-level tax advisory and litigation services basing its quality on constant updating and innovation. According to the needs of its clients, the firm has incorporated other practices evolving to a multidisciplinary firm by offering an integral solution service with the highest level of technical specialisation, total satisfaction for its clients, and compliance with all applicable laws and regulations. The firm comprises a staff of over 450 professionals (mainly lawyers, accountants, and economists).

Main areas of practice
Tax consulting: The firm has a leading and solid team of experts that continuously improve to always offer an adequate interpretation and in-depth analysis of tax laws and regulations that affect the daily operation of their clients. They identify tax scenarios and develop recommendations to create the optimal restructuring model for each unique situation to comply with tax provisions.

Individual estate and asset protection: The firm offers ex­clusive services aimed at individuals residing in Mexico regarding the fulfilment of their tax obligations, as well as in the implementation of investment and legal struc­tures in Mexico and abroad, in accordance with the provisions of the applicable tax and legal regulations.

Tax litigation: The tax litigation area offers advice and files the appli­cable means of defense against the actions of tax au­thorities, when they are in violation of taxpayer rights or when the tax laws fail to respect taxation guarantees, considering each client’s needs. CRZ lawyers sup­port clients with the filling and processing of different alternative dispute resolution procedures, both under domestic law as well as under the various international agreements signed by Mexico, which include, among others, mutual agreement procedures (MAP`s), advanced pricing agreements, as well as representation before the Mexican Tax Ombudsman.

Banking and finance and capital markets: The firm advises clients with the design and implementation of structures and efficient strategies for financing operations, obtaining resources, and raising capital. It advises clients in the incorporation of vehicles and implementation of investment and financing projects, as well as securitization procedures, compliance with regulations applicable to the stock market and the Mexican Stock Exchange, as well as operations in international markets.

Compliance and corporate integrity: The practice assists corporations and individuals, from different sectors and industries, designing tailor-made compliance programs to comply with legal obligations and sector or industry requirements at Federal or State level, including AML or anticorruption obligations. This allows clients to reduce their exposure to administrative penalties or even criminal sanctions.

Consulting in economics and transfer pricing: The team consists of experts with an interdisciplinary profile that combines tax and legal expertise with financial and economic analysis techniques, with international experience and knowledge of the businesses. Offering added value, including transfer pricing analysis, APAs, negotiation and alternative dispute resolutions, valuation of companies, shares and intangibles, audit support, dumping and antitrust analyses.

Corporate, commercial and real estate: This practice has a commitment to technical excellence, continuous updating and control of projects and legislative reforms, together with monitoring the main developments in different operating sectors from a practical and business perspective that benefits the client.

Fintech law: The firm supports its clients with the planning and implementation of the optimal corporate and regulatory structure which would allow them to venture into the Fintech sector and to develop their business in a fiscally efficient manner. The team offers advice on the design, analysis, and determination of tax effects of financial technology operations and those carried out with virtual assets.

Intellectual property: The firm advises brand owners in securing registration and achieving strategic goals relating to their trademarks and copyright. The practice includes counseling on the creation, adoption, maintenance, and protection of intellectual and industrial property rights.

International trade: CRZ’s experts leverage opportunities and utilize the best possible tools to focus on minimizing risk, reducing production/operational costs, and boosting ROI via high-profit transactions, always with the enforcement policies of all the local and international regulations that must be fulfilled. They also offer guidance regarding operations governed by free trade agreements, optimal import/export mechanisms, international traffic cost and tax/customs risk management.

Labour and social security: The labour practice blends traditional labour law with cutting edge strategy consulting in every aspect of labour, employment, social security, as well as litigation. With this practice, the firm integrated tax and labour expertise which is a perfect match and enhancement of its advice for the correct fulfilment of the law.

Local contributions: The firm has specialised experience in advising its clients to design strategic projects in real estate and payroll matters throughout the country. It also advises on specific proposals for tax compliance with contributions such as: environmental, special on the final sale of certain goods, public entertainments, games, sweepstakes and contests, supply and discharge of water and registration rights, among others.

Mergers and acquisitions: The services have been distinguished by the firm’s innovative vision of risk prevention and solution of complex aspects, including detailed clinical analysis of each of the legal implications of operations in which it participates.

Private equity: Advice in relation to fundraising and capital raising operations, fund formation, asset management, structuring of offers and investment projects.

Regulatory: The firm advises its clients that participate in highly regulated markets, such as healthcare, transportation, telecommunications, finance, among others, with special focus on developing legal strategies that add value, beyond compliance with the regulatory obligations.

Strategic administrative litigation: The administrative litigation team specializes in a wise knowledgeable response to the challenges generated by the enforcement of constantly changing laws and regulations, to defend its clients from any legal actions carried out by the federal or local authorities and their relevant consequences related to concessions, public services, certification, registration, authorization, permit, licensing as well as closing, suspension, recalling, fines, and other penalties.

DepartmentNameEmailTelephone
Tax Consulting Ricardo Paulladapaullada@chevez.com.mx
Individual Estate and Asset Protection Alfredo Sánchezsanchezt@chevez.com.mx
Tax Litigation Manuel Sáinzmsainz@chevez.com.mx
Banking and Finance & Capital Markets Jimena Gonzalez de Cossiojgonzalez@chevez.com.mx
Compliance and Corporate Integrity César De la Parracparra@chevez.com.mx
Consulting in Economics & Transfer Pricing Oscar Camperoocampero@chevez.com.mx
Corporate, Commercial and Real Estate Miguel Vallemvalle@chevez.com.mx
Fintech Law Valentin Ibarravibarra@chevez.com.mx
International Trade Guillermo Sánchez Chaochao@chevez.com.mx
Intellectual Property Gloria Niembrogniembro@chevez.com.mx
Local Contributions Francisco Gutierrez-Zamorafgutierr@chevez.com.mx
Labour & Social Security Rafael Vallejorvallejo@chevez.com.mx
Mergers & Acquisitions Miguel Vallemvalle@chevez.com.mx
Private Equity Ana Sofía Riosasrios@chevez.com.mx
Regulatory Gibrán Hazarghazar@chevez.com.mx
Strategic Administrative Litigation Gibrán Hazarghazar@chevez.com.mx
PhotoNamePositionProfile
Manuel Sainz photo Manuel Sainz
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The Influence of the Three-Circle Model of the Family Business System in Today’s Wealth Management in Mexico

Prior to 1978, family business consultants, advisors, and lawyers in Mexico and worldwide, counseled family-owned businesses by analyzing the targeted family and their business as two overlapping systems. Their conclusions brought to the family would often lead to disappointment since family needs would not always align with business needs and, reciprocally, business demands implied taking hard decisions that lead to family friction. While legal, tax and administrative solutions for wealth management are becoming increasingly creative, conflicts of interest that naturally arise within family businesses have prevailed.[1]

After several attempts to understand the multiple perspectives within a family business, Renato Tagiuri and John Davis at Harvard Business School identified a third and key pilar, ownership. Independently and overlapping the ownership circle to each of the family and business circles, when accordingly, they created a Three-Circle Model to understanding family business systems. The model identifies where people stand within a family business, in accordance with the following possibilities: (i) family members not involved in the business, but who are still considered family; (ii) family owners not employed in the business; (iii) non-family owners who do not work in the business; (iv) non-family owners who work in the business; (v) non-family employees; (vi) family members who work in the business but are not owners; and (vii) family owners who work in the business.

Each group has its own targets, opinions, priorities, and background, and successfully identifying them is a key component for wealth management involving family businesses. Where the individual is standing within the model will illustrate where his or her concerns come from. This model doesn’t only legitimate concerns, but it integrates them as a whole in order to prioritize and resolve them.[2]

One might think the Three-Circle Model only works for traditional small family-owned businesses, but it is still influential in wealth management for the ownership of bigger companies. In The World’s Top 750 Family Businesses Ranking published in 2020, family-owned businesses where ranked based on their 2019 revenues including employee numbers, market capitalization, sector, region, and year of foundation. This showed an overview of the huge economic impact that family-based companies have worldwide and region wide. In countries such as Mexico, these companies are crucial in the country’s economy, contributing to local development and representing a main source of employment. Ranked number 31, América Móvil, S.A.B. de C.V. is the first Mexican company in the list with a revenue for 2019 of $53,408.2 billion dollars. Number 139 on the list is Grupo Bimbo, S.A.B. de C.V. and the third Mexican company ranked is Alfa, S.A.B. de C.V. Among the 750 worldwide family-controlled companies, Mexican public listed companies Grupo México, S.A.B. de C.V. and Cemex, S.A.B. de C.V., also appear on the list. Several other Mexican renowned companies on the list include Arca Continental, S.A.B. de C.V., Grupo Comercial Chedraui, S.A.B. de C.V., Grupo Elektra, S.A.B. de C.V., and Grupo Carso, S.A.B. de C.V., being Grupo Bal, S.A. de C.V. the top-ranked Mexican private company.[3] These Mexican family-owned businesses and many others are expected to continue to thrive, portraying a clear example that an effective wealth management can make a family business successful.

Recognizing that no one can be in more than one area is essential in the Three-Circle Model and thus explains why the model has overlapping zones. Challenges within family businesses often arise from not having clearly identified roles and positions, lacking delimitation to where and when certain people can step-in, and when the checks and balances within the business are not sorted out. Where all three circles meet is a concentrated important role within the family business. It is the area for family members with ownership who are also employees. Jet Airways for example, a Mumbai family-owned and controlled airline company, was successful for nearly 25 years until it went bankrupt and was forced into suspending all of its operations. An inefficient wealth management resulted in an overburden of debts holding back payments of loans, lease rentals and salaries, and the loss of 20,000 jobs. Naresh Goyal’s goal as founder and chairman of Jet Airways was to initially keep control of the airline at any cost, turning down deals that could have saved the business. Goyal took charge of all decision-making, handled all operations. Major decision-making authorities fell back on limited individuals, and the board acted like a yes-man system.[4] These mistakes would have been easily avoided considering the Three-Circle Model of the Family Business System in Jet Airways’ wealth management.

In Jet Airways’ bankruptcy, India’s macroeconomic conditions such as the Rupee’s depreciation, fuel prices and elevated costs weighed heavily. The economic recession of 2018 affected a lot of India’s companies, and yet a lot of them recovered subsequently.[5] External factors are decisive in wealth management, and it is crucial to consider the country where such business is centered and where the family members reside for tax matters, as well as the country’s legislation and economic stability. A beneficial approach to protect the financial independence of family members within a family business could be to consider changing tax residence for some of the family members. If foreign countries have, for example, high taxation schemes, having a residence for tax purposes in another territory, or having dual tax residency, could be used to reduce income taxes and take advantage of a more favorable tax treaty between such countries. The provisions contained in Double Taxation Avoidance Agreements entered into by Mexico and the country of which the individual is a tax resident, could be favorable to determine whether the benefits of the treaty could be applied in relation to income obtained abroad by such family member. There are many advantages to enter the Mexican markets when family-businesses continue to grow, but also considering Mexico when establishing a wealth management strategy can also be beneficial. There are no currency restrictions in Mexico, permitting the purchase and export of foreign currency with no limitations for capital investments, contributions, and repatriations, that come along with additional favorable tax provisions. Mexican fiscal laws contain many exceptions that may result in the possibility to reduce or eliminate capital gains taxes. As per today, there is no specific inheritance, estate or gift tax in Mexico, being a great advantage for family-owned businesses that are based on family values and belief systems and meant to be passed down generation to generation.

Establishing guidelines and family protocols that set rules in the handover and transfer from generation to generation in each area of the Three-Circle Model should also be part of wealth management planning, as these companies are intended to remain family-owned, especially in countries like Mexico where “Mexican entrepreneurs represent more than 90 per cent of the firms listed on the Mexican stock exchange, and many of the top-performers are oligarchical, generations-old (..)” (McCabe, 2021).[6] Family is the core of these businesses, sometimes beneficial for reputational and marketing means, and if it is correctly passed-down with its protocols and guidelines with models like this where family adapts and systematically overlaps with the company’s needs, the results will be long-lasting family-businesses. The Three-Circle Model also plays a significant role when implementing successful strategies such as corporate governance. Walter Vieira and Mita Dixit in The 5Gs of Family Business state that for a family-controlled business to maintain harmony and equilibrium, clear guidelines and policies, roles, and accountability in the organization within the family is mandatory. Only a successful governance mechanism will ensure that the individuals in these seven sectors interact and support each other to keep family business affective and productive.[7] As family businesses expand, it will no longer be the founders and family members responsibility to teach the culture of governance, but it will become a responsibility for boards of directors to implement and monitor such governance guidelines to increase transparency and accountability.

Nearly fifty years later, the Three-Circle Model of the Family Business System should still be a strategy framework in every wealth management – but a few factors must be kept in mind for it to be a realistic and successful tool to come up with the right solutions. As the word itself implies, it is a model; and a model must never be rigid. The family circle doesn’t necessarily imply direct blood family, each family has a different meaning to what family itself is. The ownership circle can imply indirect ownership within family businesses. As for the business circle, it can bring on different appreciations to what non-family employees mean and if it includes the provision of services. The three circles are always in motion, and an effective wealth management plan should anticipate their rotation and future challenges. Finally, everyone’s role within the model should never be set in stone. As family businesses in Mexico and worldwide change and families grow, it shall be necessary to redesign the positions of where everyone fits, and consequently analyze if each groups’ motivations, internal relationships, resources, and needs are still the same. [8]


[1] Who’s in Charge? A new model for understanding family business ownership. Patricia Angus, February 22, 2019.  (The New Family Business Ownership Model (wealthmanagement.com)).

[2] How Three Circles Changed the Way We Understand Family Business. Cambridge Family Enterprise Press, 2018. Published in John. A. Davis’ website. (How Three Circles Changed the Way We Understand Family Business | John Davis)

[3] The World’s Top 750 Family Businesses Ranking, as published in Family Capital on March 3rd, 2020. North Mews Publishing Limited.

[4] Sustainable Entrepreneurship: Innovations and Transformation. Ajoy Kumar Dey. Bloomsbury Publishing India Pvt. Ltd. Bimtech, 2021.

[5] IBIDEM.

[6] Mexico’s Five Most Profitable Family Businesses. Published online in Tarawat Magazine, January 11th, 2021.

[7] The 5Gs of Family Business: Genesis, Growth, Gen-next, Governance and Giving Back. Walter Vieira Mita Dixit, January 17, 2019.

[8]  IBIDEM.


Co-authors:

Alfredo Sanchez

Ana Sofia Rios

Jimena Gonzales de Cossio

IP in Mexico

A. Introduction.

Mexico has pushed towards an effective national legal system for the protection of intangible rights and, through the years, has adapted its legislation to the international treaties that govern intellectual property worldwide and regionally.

The proximity and close commercial relationship with the United States and other commercial partners, has caused the Mexican government to reformulate and ensure adequate enforcement aiming to attract foreign investment and capital.

As one of the largest economies in the world, it is important that Mexico remains at the forefront in terms of intellectual property regulation and enforcement, and it has strived to maintain this position.

B. Influence of International Treaties in Mexico.

Some IP international agreements adopted by Mexico, such as the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property, both administrated by the World Intellectual Property Organization, introduced the legal IP framework into the Mexican legal system.

The globalization of industry, market and high technology production, led Mexico to enter two important agreements that established minimum standards focused on the enforcement and protection of IP rights: the North American Free Trade Agreement (NAFTA) and the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

The former, signed in 1992, gave way to a relevant amendment to our domestic industrial property law. The latter is a comprehensive multilateral agreement that emerged with the creation of the World Trade Organization in 1995, mostly focused on the enforceability of IP rights among its members.

In 2020, NAFTA was replaced by the free trade Agreement between Mexico, the United States and Canada, T-MEC or USMCA, which has resulted in the enactment of new legislation on intellectual property in Mexico. This includes the recently approved Mexican Federal Law for the Protection of Industrial Property (LFPPI), and the amendments to the Mexican Federal Copyright Law (LFDA) with a special focus on the protection of intellectual property in the digital environment.

The LFPPI is innovative as it has introduced new forms of protection for industrial property. Non-traditional trademarks, such as trade dress, smell, and sound marks, provide new alternatives of protection for individuals and companies.

The “secondary meaning” doctrine widely developed in the United States came into existence in Mexico. Unlike the previous law, an otherwise unprotectable trademark may now obtain registration if it has acquired distinctiveness.

A trademark that has been registered or applied-for in bad faith is subject to annulment or refusal. This amendment has intended to deter squatters from seeking registration of trademarks owned by third parties overseas.

For many years, letters of consent were rejected by the examiners with the excuse of avoiding consumer confusion. With the current law a consent is sufficient for two confusingly similar or even identical marks to coexist in Mexican market.

With the purpose of fostering the use of registered trademarks and to remove marks that could block the registration of new marks in which use is intended, a declaration of use must be submitted after the third anniversary of a trademark registration.

As to the LFDA, new provisions protecting IP rights in the digital environment came into effect. One example is the adoption of a notice and takedown system which allows the holder of a copyright to remove infringing content from digital platforms. The amendments also provide a safe harbor for the internet service providers that comply with such system.

Additionally, criminal sanctions are provided to prosecute those individuals eluding or circumventing technological protection measures of copyrighted material.

On the other hand, Mexico became a party to the Nice Agreement concerning the International Classification of Goods and Services in 2001, which resulted in a massive reclassification of the identification and scope of the existing registrations. Over the years, IMPI has worked on a complementary list to include certain goods or services not expressly mentioned in the international classification.

Another international treaty that has impacted the Mexican IP legal framework is the Madrid Protocol, which came into effect in 2013. Interestingly, from 1909 to 1943, Mexico was a party to the Madrid Agreement but decided to withdraw arguing it was in the best interest of the country given the low number of nationals taking advantage of it.

Mexico’s recent adherence to the Madrid Protocol makes sense in a globalized world in which more individuals and companies seek to invest and protect its IP rights in Mexico. While Mexican nationals seldom use the Madrid Protocol and incoming applications greatly outnumber outgoing filings, it is still an interesting tool that should be promoted and utilized. After Mexico’s adhesion to the Madrid Protocol, other Latin American countries such as Colombia and Chile have decided to join.

C. IP Enforcement in Mexico.

There is a relative concern on the observance of IP rights. Counterfeiting is a major problem in Mexico that harms not only our intellectual property framework but our economy. Intellectual property legislation has been modernized to dissuade infringing behavior and ensure enforcement of IP rights both in the physical world and the digital environment.

Mexico has two robust authorities to protect and enforce trademarks, patents, and copyrighted works: the Mexican Institute of Industrial Property (IMPI) created in 1993, and the National Institute of Copyright (INDAUTOR) created in 1996.

Both institutes have had an important evolution in terms of modernizing their interaction with the IP system’s users through technological platforms and tools. A public and up-to-date consultation database and the possibility of making e-filings, secures remote and effective access to facilitate the protection and defense of intangible assets.

Additional digitization actions have been implemented since the pandemic in order to promote a culture of rights’ acknowledgement and provide users with legal certainty and transparency.

Further, the LFPPI granted new faculties for IMPI to quantify damages and lost profits through a simplified proceeding that used to take several years to conclude in the past. This amendment reduces the time and effort required to obtain a compensation, by empowering IMPI to address claims for damages. If implemented correctly, this system is certainly a huge step to ensure full and effective compensation for IP rights holders.

D. Mexican own agenda in the IP field.

But Mexico has not only focused on the protection of rights from abroad. As a country with vast cultural richness and diversity, Mexico’s public policy has focused on the protection and safeguard of its cultural assets, such as traditional knowledge and expressions. Special attention has been placed on the rights of indigenous and other communities with the enactment on January 17, 2022, of the Federal Law for the Protection of the Cultural Heritage of Indigenous and Afro-Mexican People and Communities.

Mexico has also seen a rise in the recognition of goods protected by denominations of origin beyond the well-known tequila and mezcal. Distilled spirits such as Sotol and Bacanora have seen a boom in commercialization and consumer preference.

Other actions have been put in place regarding the use of IP on advertising material, such as the prohibition of displaying certain designs on child-focused advertising for the sale of high sugar levels products.

The current federal government has focused its efforts on a socially focused agenda, in which social programs seem to have more importance than innovation. However, regardless of this change in political determinations, Mexico remains with a robust intellectual property system that ensures the proper protection and enforcement of IP rights, both for nationals and foreigners.

E. Technology and IP Evolution.

Intellectual property laws must evolve at the pace of a globalized world submerged in a rapidly growing technology that demands legal systems to be harmonized with the parameters of business and human innovation.

Some current forms of IP shall be revisited, while new manners of protecting intangible rights must come to life. Unconventional artistic creations and state of the art inventions, such as artworks created with artificial intelligence and patents with living matter, are just a few examples on how IP has evolved to conform to new standards and realities.

Likewise, publicity rights in the digital world, brands in the metaverse, copyright associated to NFTs, are becoming more and more frequent and attractive. Social and technological progress demands room for discussion on how intellectual property interacts with new or modernized forms of intangible assets.

F. Conclusion.

Mexico has made an effort to implement international treaties with focus on its own social and cultural realities, without losing sight of the importance of promoting innovation and technological development.

In situations that generate technological challenges for IP legislation and practice, there is a need to assure a solid and up-to-dated intellectual property protection and enforcement system.

Although there is still much left to do in terms of research and development in Mexico, the current IP legal framework includes high standards of protection. Consolidating a top-notch and active surveillance and enforcement system, on the other hand, remains a pending issue.


Author:

Gloria Niembro

Tax in Mexico

MOMENT OF GOVERNMENT TAX SUPERVISION IN MEXICO, CHALLENGES AND STRATEGIES

INTRODUCTION

As a result of the change of administration, several factors have led the Mexican tax authorities to exercise a pressure never seen before on captive taxpayers and, thus, attempt to collect the largest possible amount of tax funds. In many of these cases, such collection could imply violations of the fundamental rights of taxpayers which, until a few years ago, were mostly respected.

The aforementioned circumstance has generated an environment of uncertainty and disincentives towards private investment in Mexico because the result of some audits have left taxpayers in a state of legal uncertainty and insecurity, even, on some occasions, in a state of defenselessness. This situation is even worse in the case of acts that go beyond audit procedures such as invitation letters and oral comments tending to achieve a persuasive collection.

Fortunately, there are certain mechanisms, both preventive and defensive (measures and legal remedies) that should be considered for purposes of better handling audit procedures, which may help taxpayers deal with the current environment differently.

In fact, we consider that taxpayers that are taxed in Mexico should be prepared and change the form in which they have worked in the past form a tax standpoint in order to create a preventive culture and act at any time in the most expedient manner possible to protect their interests.

In this article, we will address the previous ideas in general, proposing a series of measures that may be an indication for those persons that pay taxes in Mexico so that their fundamental rights from a tax standpoint may be respected such as, an adequate assessment of the documentary evidence they contribute to the development of the audits to which they are subject to and, if necessary, the filing of the applicable legal remedies with the jurisdictional bodies.

CURRENT ENVIRONMENT

On December 1, 2018, a new political party took office in Mexico facing, as it is common, several challenges, within which we may highlight that related to a low collection on the part of the Public Treasury, together with a philosophy of austerity and budget cuts to state entities. A new ideology was about to start an awaited change in the direction of Mexico, with the ambition of carrying out new projects that would require significant funds with charge to public expenditures.

As of this moment, great pressure could be felt towards the business environment, which was classified, on a generalized manner, as “corrupt” and “evil”.

In 2020, the difficult economic situation that could already be felt in the country was exacerbated as a result of the Pandemic caused by the SARS-CoV-2 (Coronavirus).

With the need to obtain greater funds for public expenditures and the lack of income generation on the part of several economic sectors, the tax authorities began exercising pressure on taxpayers in order to respond to such need, thus giving rise, as a result thereof, to an aggressive policy on collection matters, which resulted in the flight of capital and the shortage of investment in the country.

In fact, with a disproportionate aim of collection and the budget cut that was carried out for purposes of achieving such objective, the tax authorities began with legal interpretations merely with collection intentions, moving away from technical interpretations and the strict and legal application of the law. It should be borne in mind that despite that in the past this type of interpretations existed, they were not as extreme and, even, without a context of economic logic and the lack of adherence to the fundamental principles set forth in the Mexican Constitution.

In response to the position of the authorities and the threat of numerous tax deficiency assessments, taxpayers have been obliged to approach the latter in order to reach agreements and negotiations which, regardless of the unlawfulness of the positions in the related tax supervision procedures, in many cases, taxpayers have accepted them in order to avoid greater detriment.

¿What to do?

Overwhelmed by the difficult economic situation faced by the country and concerned about the current aggressive collection policy, many taxpayers have questioned what to do against such actions which, as previously commented, on many occasions, have resulted arbitrary.

As a mere indication of our advice to taxpayers so that they face the audit procedures in a better way and position, the following should be taken into account:

ANALYSIS OF ADOPTED CRITERIA

It would be advisable to review the criteria adopted during the last 5 years for purposes of assessing tax liabilities to taxpayers in Mexico. Specifically, in the case of individuals and legal entities, should the latter have made payments to related parties due to items such as royalties, technical assistance, and interest. Further, in the event that transactions with related parties abroad may have been carried out, taxpayers should have sound transfer pricing studies and comply with the applicable formalities such as proof of tax residence of the recipient of the payment, as well as the identification of the beneficial owner thereof.

TIMELY FOLLOW-UP OF AUDITS

Commonly, when audits are carried out, there is no proper understanding between taxpayers and government officials; for this reason, it is advisable to have a timely follow-up of the requirements that are made, as well as the form of response thereto, taking into consideration at all times the stages that follow the audit.

In this respect, please bear in mind that in accordance with the Federal Tax Code, as a general rule, inspection visits and desk audits, which constitute the most common audit procedures, cannot last more than 12 months; subsequent to this period, the tax authorities have a 6-month-term to assess the applicable tax liability (there are exceptions for certain taxpayers such as the financial sector, as well as those taxpayers that carry out transactions with related parties abroad, among others).

During the general 12-month-term, the tax authorities issue a series of requirements for taxpayers in order to know their tax situation and, if applicable, proceed to inform them the respective observations. In this case, it is very important that the documentation and information that taxpayers file with the tax authorities be clear, accurate and respond to the specific request; also, taxpayers should have the documentary evidence related thereto, both in respect of the subject matter and the materiality of the transactions.

In other words, in addition of evidencing which is the tax situation of taxpayers, documentary evidence related thereto should be submitted to the tax authorities, which should include, at the discretion of the tax authorities and our Tribunals, that evidence which is deemed ideal documentation to prove due compliance with the tax provisions. The foregoing circumstance, due to the fact that we have noticed that sometimes the information that is submitted is not necessarily ideal to comply with the related requirements.

In view of the foregoing, we suggest that from the start and throughout the conclusion of the audit, taxpayers try to properly respond to the requirements, even try to respond based on any experience related to other audits made to taxpayers; further, it is also important to have in mind at all times which of the information and documentation submitted may be useful in subsequent instances or in the defense of the matter, which we will comment below.

DEFENSE FILES

Reference is made to defense files as that set of documents and information analyzed and collected by the taxpayer for purposes of proving the proper compliance with its tax obligations.

In this respect, a defense file has two stages.

The first one consists of the integration of all the documentation and information which, even prior to the exercise of the powers of verification, in our opinion, taxpayers should obtain and integrate to prove due compliance with their tax obligations; the second is integrated with that information which, during the course of the audit, taxpayers obtain and integrate to comply with the requirements of the tax authorities.

The file integrated in both stages is essential in order to i) prove due compliance with the tax obligations to the tax authorities and, ii) if necessary, file the applicable legal remedies with the corresponding courts.

Please bear in mind that prior to the exercise of the powers of verification, taxpayers should already have a defense file so that they may duly and timely respond to the audit since the beginning and through the conclusion of the process. As a result thereof, they will be able to have the specific elements to respond to, and disprove any eventual observation made by the tax authorities.

To the extent that taxpayers have a precautionary defense file integrated prior to the commencement of the powers of verification, and a subsequent defense file integrated based on the specific requirements that may arise during the course of the audit, they would have all the elements to disprove any observation made by tax authorities related to compliance with their tax obligations.

Another issue that should be taken into account is that prior to the assessment of the tax liability, within the inspection visit and the desk audit, which constitute the most frequent powers of verification utilized by the tax authorities, a preliminary tax audit report is issued, for purposes of informing the taxpayer of the observations detected by the tax authorities during the audit and, in respect of which, taxpayers may choose between disproving them or correcting their tax situation in accordance with the terms established by the tax authorities.

In the event of opting to correct their tax situation, taxpayers should take into account that the law provides certain benefits (reduction of surcharges and fines) which, if applicable, would make the correction for which the taxpayer opted less burdensome.

On the contrary, in the event of opting to disprove the observations, it is indispensable to prepare the response duly grounded in law and fact and sustain it with the defense file previously referred to, for purposes of supporting any assertion that may be made in order to prove the due compliance with the tax obligations of taxpayers.

Special emphasis is made on the issue of evidence; in this respect, it should be borne in mind that in accordance with a criterion which constitutes a court precedent1, and therefore is mandatory for all courts, taxpayers are not entitled to produce in trial any evidence that was not previously produced in the administrative procedure of origin (audit) or in the respective administrative appeal.

In other words, all that evidence that the taxpayer might have not submitted to the tax authorities during the audit or in the processing of the administrative appeal, cannot be contributed to the annulment complaint that may be filed against an eventual tax liability with the Administrative Court.

It should be noted that the last opportunity for a taxpayer to produce evidence additional to that produced during the audit procedure, would be when filing an administrative appeal with the tax authorities, which is optional for the taxpayer. We will discuss this legal remedy further in the corresponding section.

It is worth mentioning that, in the event that the taxpayer opt to disprove the observations informed by the tax authorities, there is an alternative mean of tax dispute resolution named conclusive agreement, which should be filed the Mexican Taxpayers’ Ombudsman, within a specific term and prior to the issuance of the resolution assessing the tax liability. The following section will address an in-depth analysis of the alternative mean of tax dispute resolution previously referred to.

PRODECON AND NEGOTIATION WITH THE AUTHORITIES

The Mexican Taxpayers’ Ombudsman (hereinafter PRODECON for its acronym in Spanish) is a specialized decentralized public body on tax matters which renders several types of services to the taxpayer. PRODECON is the Ombudsman on taxation to taxpayers in Mexico.

For purposes of this article, 2 of such services will stand out, to wit, complaints, and conclusive agreements.

Complaints consist of a procedure whose purpose is to denounce, so that PRODECON may be aware of and investigate those acts of the authority which are carried out in violation of the rights of taxpayers so that the authorities in question desist from these violations and redress them in the enjoyment of their fundamental rights. In such procedures, PRODECON may issue public recommendations and propose, if applicable, the corrective measures for the tax authorities that may be involved.

Conclusive agreements are an alternative mean of tax dispute resolution whose purpose is that PRODECON, as a public body with technical, functional, and managerial autonomy promote, reveal, and facilitate the advanced and consensual solution of disputes and disagreement that, during the exercise of an audit procedure, may arise between taxpayers and the tax authorities.

The application for a conclusive agreement may be filed at any time as of the commencement of the exercise of the powers of verification, to the extent that the tax authorities had already qualified the facts or omissions, and throughout a twenty-day-term counted as of that in which the final report of the audit is drawn up (tax inspection visit), notifying the ruling of observations (desk audit review) or the provisional resolution (electronic review).

With the amendments to the provisions that govern this procedure, as of 2022, the processing of conclusive agreements should not exceed a twelve-month-term counted as of the filing of the respective application; therefore, it is important that taxpayers file their application as comprehensive as possible and in compliance with all the requirements of the law for purposes of expediting the procedure and avoiding other requirements.

In view of the foregoing, please bear in mind that despite that PRODECON has been strongly criticized by the current administration, it is still an institution that facilitates dialogue between the authorities and the taxpayer more neutrally, which makes transparent the actions of the parties that resort to final agreements. In fact, in practice, it has become common that prior to the assessment of a tax liability, taxpayers attempt this type of procedure which turns out to be a sort of mediation between the taxpayer and the tax authorities.

Hence the importance to take the necessary precautions to have, at all times, documentary evidence to prove due compliance with the tax provisions on the part of the taxpayer, and to conduct the proper defense of the legal and economic reasoning that led to the adoption of a specific position within the taxpayer’s taxation scope so that, since the beginning, if possible, the best agreement may be reached with the tax authorities; further, in the event of failure to do so as a result of which the tax liability is assessed, the taxpayer may have more elements to prepare a proper defense.

For this reason, despite that in recent years there is the feeling that PRODECON has lost the strength that it initially had to counteract the arbitrary actions of the tax authorities, the complaint and the conclusive agreement are still efficient mechanisms that may help to achieve results commensurate with the interests of taxpayers.

LEGAL REMEDIES

In the event of a possible tax deficiency assessment issued by the authorities (tax liabilities), there are two means of defense that taxpayers may exhaust in the event of not sharing the latter´s criterion.

Administrative appeal

The first one of these legal remedies is an administrative remedy called administrative appeal (either in the traditional way or on the exclusive resolution of the merits of the case). The filing thereof is optional, therefore, if the taxpayer has no intention of exhausting it, it may directly file an annulment complaint before the Administrative Court.

In practice, it is complicated to obtain a favorable result within such administrative appeal; however, it is usually filed in order to contribute more evidence to the tax authorities because it is the last moment to do so, which would allow a proper defense in subsequent contentious instances.

In fact, as previously commented, based on the court precedent issued by the Second Division of the Supreme Court of Justice, that evidence that was not submitted during an audit procedure, can still be submitted in the administrative appeal, but not in a subsequent instance.

Another aspect that should be considered is that related to the processing of an administrative appeal, in which case, it is not necessary to produce any security interest to guarantee the tax liability; this situation is relevant derived from the amount of the differences that the authorities are currently assessing on taxpayers as a result of their audit procedures.

In the event of obtaining a partial favorable resolution or a resolution unfavorable to the interests of the taxpayer within an administrative appeal, they may challenge such resolution together with the tax liability originally assessed through the filing of an annulment complaint, which will be analyzed in the following section.

Annulment complaint

The annulment complaint is a legal remedy that taxpayers may file against a tax deficiency assessment or against the resolution which may fall on the administrative appeal they might have previously filed against the aforementioned assessment. This legal remedy is resolved by the Administrative Court.

Against an unfavorable decision within an annulment complaint, it proceeds to file an amparo complaint, which will be definitively resolved by a Collegiate Circuit Court. In turn, against a favorable decision, the tax authorities may file an appeal, which will also be resolved by a Collegiate Circuit Court.

Some years ago, the law incorporated a new modality for the filing of annulment complaints, which was named complaint for the exclusive resolution of the merits of the case. The intention of this complaint is to study exclusively the merits of the case, without analyzing any formal aspects.

Thus, in practice, taxpayers have sometimes opted to file this legal remedy, waiving any other formal argument they may assert against the resolution issued by the tax authorities with the intention that merely the merits of the case be analyzed for purposes of determining in this manner whether its tax obligations were duly met. One advantage of this procedure is that during the stage of the complaint for the exclusive resolution of the merits of the case, it is also not necessary to produce any security interest to guarantee the tax liability, clarifying that in the stage of amparo or appeal, in fact this would be necessary.

International treaties and protection of investments

Regardless of the legal remedies previously referred to, it should be noted that in any strategy that may be implemented in the case of an audit procedure, the taxpayer should analyze the possibility of exhausting, in due time, the MAPS (mutual agreement procedures) set forth in the treaties for the avoidance of double taxation entered into by Mexico.

Additionally, it should also be taken into account that several international treaties contain clauses for the protection of investments through which, in the event of arbitrary acts on the part of the tax authorities, taxpayers have attempted that the matter be resolved with international panels.

Under these terms, despite the domestic legal remedies, it would be advisable to also consider a more comprehensive analysis of the specific situation of the taxpayer in the event of tax audits in order to have all the possible solution alternatives.

Significant considerations

It is important to know all the stages of the audit procedures, the alternative means for the solution of controversies, as well as the contentious procedures or even the legal remedies that, at an international level, may be implemented in order to evaluate the case on an integral basis and develop an integral strategy of defense that adjusts to the requirements of each taxpayer, since there are several factors that may turn each of them more or less attractive, such as, costs, guarantees and time for resolution, some of which have already been explained herein.

In view of the foregoing, the possibilities of achieving a favorable result may be significantly increased, because, despite that arbitrary acts may be carried out by the tax authorities, a well-structured case, duly grounded in law and fact, should contribute to obtaining a intended result to the benefit of the taxpayer.

Further, a graphic which contains information of the authorities was recently published in a journalistic note. This graphic shows that during 2021 resolutions for private parties through the contentious-legal instances were mostly favorable, indicating that in such year they amounted to 54.4% of the complaints. Based on our experience, this percentage is even greater than that mentioned in the related journalistic note.2

IN SUMMARY

The environment currently faced by Mexico, at a political level, and resulting from the Pandemic, has caused that the tax authorities exercise too much pressure on taxpayers on collection matters, even in some cases, frequently violating their fundamental rights.

There are a series of remedies that taxpayers may implement for purposes of preventing and defending themselves from the positions of the tax authorities.

The timely follow-up of audits and the integration of a proper defense file that contains a series of documents that taxpayers may collect daily in the ordinary course of their activities and prior to the exercise of the powers of verification, as well as the documents that during an audit the taxpayer considers appropriate to collect in accordance with the observations of the authorities, have become fundamental.

Nowadays, PRODECON (Mexican Taxpayers’ Ombudsman) has played a significant role due to the fact that the filing of complaints and conclusive agreements has resulted in strong support for taxpayers.

In the event that no consensus is reached with the tax authorities during the audits or in the implementation of the alternative means for the solution of controversies and, as a result thereof a tax liability is assessed, taxpayers may file the applicable legal remedies against such assessments which, depending on the specific characteristics of the case, may have good possibilities of success.

 

Footnotes

[1] “CONTENTIOUS ADMINISTRATIVE SUIT. THE PRINCIPLE OF OPEN MATTER IN DISPUTE (LITIS) THAT GOVERNS IT, DOES NOT IMPLY FOR THE PLAINTIFF A NEW OPPORTUNITY TO OFFER THE EVIDENCE THAT, IN ACCORDANCE WITH THE LAW, IT SHOULD HAVE PRODUCED IN THE PROCEDURE OF ORIGIN OR IN THE ADMISSIBLE ADMINISTRATIVE APPEAL, BEING IN A LEGAL POSITION TO DO SO [MODIFICATION OF COURT PRECEDENT 2a./J. 69/2001 (*)].”

[2] Pierde SAT 54% de juicios contra contribuyentes (reforma.com)

 


Authors:

Pablo Corvera

Claudio Cardenas

Isabel Nuñez