On 23 December 2019 it was published in the Local Gazette the tax bill for the fiscal year 2020 in Mexico City, which contains new taxes, increase in others, and the adoption of various benefits, incentives and procedures to resolve disputes with local tax authorities. Below is a summary of the most important amendments:
1. Reductions in property tax.
A discount of 8% is granted if the annual payment of the tax and fee is made during January, and 5% during the month of February, with the option of paying through credit cards in several installments. According to the Tax Code of Mexico City, appraisals will be valid for one year instead of two years, and for commercial purposes only for six months. This is important, since taxpayers will need to submit and register before the authorities an appraisal every year, in those cases where it is intended to pay the property tax under self-determination (and not based on the proposed tax billed).
Benefits for vulnerable groups.
Property tax fixed payment of 50.00 MXN every two months for retirees, pensioners, widows, separated women, single mothers, people with permanent disabilities and elderly poor, when the value of the property does not exceed a threshold of 2.14 million MXN.
Reduction of 30% in the property tax and accessories for retirees, pensioners, widows, elderly, when the value of the property exceeds the threshold of 2.14 million MXN.
Subsidy in the payment of property taxes for real estates not exceeding a value of 2'252,834.47 MXN, by paying a bi-monthly fixed fee. The subsidy will be included in the tax bills issued as of January 2020.
100% reduction of property tax and tax on real estate acquisition (ISAI) for owners of properties in a land regularization program.
Reduction in the property tax to individuals owning or possessing social housing or public housing, establishing a bi-monthly fixed fee of 50.00 MXN.
The creation of a Special Program for Urban Regeneration and Housing, to exempt 100% payment of ISAI, and fifteen more contributions in urban enhancement, water and environment governmental fees.
Reduction of 100% of property taxes and water fees for owners of buildings and real estate who are totally or partially destroyed because of a natural disaster.
Reduction of 25% for taxpayers who maintain mature trees, and 10% for those who maintain sustainable buildings and green roofs.
Reduction of 100% of property taxes and water fees for Civil Associations and Private Assistance Institutions.
2. Payroll tax.
In case of taxpayers initiating operations, a reduction of 45% of payroll tax in the first year is set out, 20% if they increase the labor payroll in a 25%, and a reduction between a range of 20% to 40% when purchasing systems, equipment and materials that reduces emissions, reprocess or recycle waste.
3. New Taxes.
a) Tax for Bets.
The bets will have a tax of 10% on the amount of the expenses made by the bettor. The permittee will have the obligation to withhold the tax, and must deliver it on a monthly basis and separated from the tax on lotteries, raffles, sweepstakes and contests. The latter is also modified so those organizing lotteries, raffles or sweepstakes pay a tax rate of 13% (instead of 12%) of the total payments obtained in Mexico City.
b) Final Sale of drinks with alcohol content.
Aligned with the obligation already in force in the State of Mexico, this tax will be paid by individuals and companies that in the territory of Mexico City carry on the final sale of alcoholic beverages, except for the sale of beer, mead and products derived from fermentation, reserved for the Federation.
A rate of 4.5% will be applied on the final sale price; it shall mean final sale, where the physical delivery of alcoholic beverages is carried on by the importer, producer, packer, or distributor within Mexico City territory, for subsequent sale to the general public or for consumption.
c) Technological platforms for private transport.
It is defined that payments made by drivers of technological applications, consisting on 1.5% of the total charge for each trip will be considered tax leverage, and will no longer be contributions to the Trust of Mobility of the City.
This implies that the collection and omission to pay such leverage will be on charge of the Local Ministry for Administration and Finance of the Mexico City and no longer by the Department of Mobility, therefore, the omission in payment of the leverage could trigger tax deficiencies.
d) Accommodation Services.
For hotels and businesses that provide hosting services, the tax has increased from 3% to 3.5%. In addition, individuals and companies providing accommodation services to individuals through facilitators, intermediaries or applications must pay a tax of 5%.
In our view the distinction above mentioned could be considered as unconstitutional, however, any legal action must be filed by the subject of the tax (i.e. the service provider hosting, not the intermediary).
e) Owners of vehicles and new aircraft.
From January 1st to March 31st 2020 a subsidy of 100% payment is granted for the payment of the holding of vehicles tax , provided that the invoice depreciated value do not exceed 250,000 MXN with VAT included. The tax payment can be made in several installments without interests through credit cards. Since 2021 a single rate of 3% of the value of the vehicle will be adopted. This will apply to vehicles that does not exceed 15 passengers and motorcycle with models after 2001.
The Ministry of Transportation will implement a new form of vehicle registration, aiming to force importers, manufacturers, distributors or authorized sellers of new vehicles, to register the vehicle purchasers with tax residence in Mexico City prior to delivery, considering them jointly and severally liable for failure to pay fees.
For new aircrafts, the tax is the amount obtained by multiplying the maximum aircraft weight in tones to 12,460.50 MXN for aircraft piston, turboprop and helicopter, and to 13,421.00 MXN for jet aircraft.
4. Settlement in Tax audits.
To resolve tax audits, it will be implemented during 2020 a conciliation procedure with the authorities of the City called e-Revocación, in substitution of the administrative appeal. This procedure could be filed since the authority notifies the initiation of an audit and before the tax assessment is notified.
As of the filing of the e-Revocación, the legal terms of the tax audit will be suspended. The procedure shall be conducted in writing and in oral conciliation hearings with the benefit of getting up to 100% of the waiver of fines and surcharges, if an agreement is reached with the authority.
In case it is not possible to reach a settlement, taxpayers will be entitled to file the corresponding administrative legal remedies. However, it will have to exhaust the e- Revocación before filing the administrative tax litigation.
In installment payment programs, the condition to pay the 20% of the total assessment has been deleted, being only necessary to cover the first installment, and limiting the program to 48 months.
5. Mexico City mailbox
Taxpayers will have an electronic tax mailbox, by which they may submit notices, applications, writs and comply with obligations and requirements through digital documents. This will have a similar operation to the tax mailbox with the federal authorities.
6. Statute of Limitation
The Law has been amended to clarify that it is possible to initiate a statute of limitation procedure to declare that a tax assessment has expired, provided that a tax audit has been conducted, and not as in the past that it was possible to initiate a statute of limitation procedure at any time.
7. Inclusion of the attempt as criminal conduct.
The attempt as a punishable criminal conduct is added with prison up to two thirds of the penalty applicable to the offense, stating that if the author of the attempt desists or prevent that the crime is consumed, the criminal prosecution will not be exercised.
8. Water Governmental Fees.
Few days ago, the Government published a decree, whereby an additional 35% payment is contemplated for the water governmental fee of domestic used, when the users of one of the 162 selected neighborhoods register a higher accumulated consume of 60,000 liters during the first four months of the year.
At Baker McKenzie, we will be happy to further discuss the above amendments.