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Tax Law Reforms for 2014

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Very extensive reforms have been made to Mexico´s tax laws and have been finalized in November, 2013 and will become effective on January 1, 2014 not giving give people a lot of time to prepare.

No, and that’s going to be a problem. First, because all the appointment times at the SAT offices (Mexico’s tax department) are filled for quite a while, and second, because some of the changes will affect banks and businesses quite a bit. I think it’s going to be a messy transition as many will be unable to comply in time with only 2 weeks left until the government goes on vacation and returns January 2nd when the new laws take effect and even then there may be delays of weeks for people to be able to get appointments at the tax office to set themselves up or make changes.

There are new IVA sales taxes.

It’s now going be 16% nationally (whereas it’s been about 11% in the border areas), and it will include taxes on soda, chewing gum, and pet food throughout Mexico. Those weren’t included in the past. So, people with pets should stock up at Costco before the new year. Dog shelters will be especially hard hit. And, for people driving back from up north after Christmas, or coming back from nationalizing their vehicles at the border, they’ll want to fill up their tanks near the border, where the gas tax will still be 11% until the end of the year.

Will anything change at customs (Aduana)?

Yes, temporary importation of certain goods will also start being taxed. That could open the door in the future for a tax on the temporary importation of vehicles. Not yet, though. And, the mandatory use of customs agents for any value of goods to be imported has been eliminated. The use of an agent will be optional, which is a good thing because then they’ll have to be more competitive in terms of rates and quality of service.

Also, customs is going to be checking the value of imported goods more closely and communicating with the countries where merchandise is leaving to check declared values. People may be more likely to get caught if their car nationalization pedimento say the car is worth 10,000 pesos, but it is clearly worth much more.

What about new banking regulations?

Starting in 2007, there had been a tax on large cash deposits: 2% on the amounts of deposits exceeding 15,000 pesos, changed in 2010 to 3% on amounts exceeding 15,000 pesos. Those taxes have now been eliminated. But, banks are now required to report to SAT any deposits over 15,000 pesos, and any payment of credit card debt of $20,000 pesos made at a time. SAT may also audit you and compare your credit card expenditures to your declared income. They can then contact you to explain these transactions within a certain time frame. If you don’t respond within that time frame (say, 20 days), they could establish liens and levies. And, of course, you wouldn’t respond if the address they have for you is old. So, it will become very important for people to make sure their bank has up-to-date home addresses and email addresses. That’s especially true for snowbirds. They’ll need to check their email frequently while they’re gone.

Also, banks will require people to have an RFC (tax ID number) in order to open a bank account. They have enabled the ability to get an RFC number online but people first need a CURP number which has to be processed through immigration, but that could take time to set up. With offices closing for the holidays, people may have problems in January and would have to wait until February to open the account as they need their CURP first although the Guadalajara immigration office processes them same day and Chapala does not so Chapala residents who do not want to wait should apply for their CURP number in Guadalajara.

Anything new for businesses?

Yes, the current process for small business reporting (REPECO) will be eliminated. Currently, small businesses report their gross earnings every two months. For January, that will still be the case in order to report earnings for the November – December months. After that, there will be more paperwork. The process will come through the regular tax system. That is, earnings will need to be reported, and so will deductions, and facturas (invoices) – just like big businesses do today. And the tax rates will be between 2% and 35%. Not only will there be more paperwork, but there will also need to be greater mastery of Spanish. My office will help people by getting them set up and familiar with the new system.

Another change is the elimination of the business IETU tax (single-rate flat tax started in 2007).

And, non-profits will start being required to be authorized by the SAT to receive donations which would allow them to continue preferential tax treatment. That’s obviously going to be critical for them. They should probably start that process immediately, and try to get their major contributors to donate before January 1st.

The most controversial of the new business regulations is probably the requirement for electronic facturas and the elimination of paper facturas and to give all employees online facturas (CFDI) rather than paper facturas when they get paid in order to be able to deduct their wages. That system may not be ready by January 1st, by either the SAT or the businesses, so that’s going to create a lot of problems.

What about tax changes for investors and real estate owners?

Mexico has caught up to many other countries and will tax capital gains on the sale of stock at a rate of 10% as well as tax dividends at the same rate of 10%.

For real estate sales there will be a maximum capital gains tax exemption pegged using the UDI index (investment units) with a new limit of 700,000 which equates to about 3,500,000 pesos so any gains over that amount from a sale will be taxed, the prior limit was 1,500,000 UDIs with that exemption waived if someone could prove they lived in the home for the preceding 5 year period.

That’s a lot of changes.

There are more. Those are just the ones that I think will affect expats the most. SAT is also firming up the tax code in other ways. They did some research to determine where and why they lost tax court cases in the past, and have now plugged some of the advantages taxpayers had in court. I’ll know more next week (1st week of December), so I can give you an update then when I go to another 5 hour tax update class.

Spencer

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I don't know. It may be prudent to get one as if the government increases reporting requirements on the banks they might request that within a certain time period all accountholders have an RFC

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Thank you for the review of the new tax laws.

Spencer, could you please post the web site for getting your RFC on line. We have our Curps.

Thank you.

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Just bought a bag of cat food for $280p - it will be $325p next year, that's going to put a lot of people in a bind and the animals will suffer most.

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If you can't get to it from that link go to the SAT main page http://www.sat.gob.mx/sitio_internet/home.asp

Then scroll down to the bottom and under Información Destacada, click the box labeled Inscríbete en el RFC.

The posted link worked fine getting to the correct page however, if you don't enter the CURP and the image code properly you'll be kicked out.

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Thank you for your help. The links do not work. They do not let me enter my CURP. The page is frozen.

I tried it several times and no go.

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Worked for me, except said I was already registered but I tried to test it. Maybe restart your computer or try another browser?

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The first link worked for me so I now have a RFC. Some of the information under my CURP is still wrong but there seems to be no way to correct it.

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As long as you have the number you really don't need the printout. If you didn't write down the RFC number you can retrieve it by going back to the original screen, re-enter your CURP and the image letters.The error will include your RFC number.

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It worked for me but trying it for somone else they say it has already been registered and then tell you the RFC number. In this case there is nothing to print out just a sentence. I wonder how you could get somewhere where it gives you the SAT page with all the information including the RFC.

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What about new banking regulations?

Starting in 2007, there had been a tax on large cash deposits: 2% on the amounts of deposits exceeding 15,000 pesos, changed in 2010 to 3% on amounts exceeding 15,000 pesos. Those taxes have now been eliminated. But, banks are now required to report to SAT any deposits over 15,000 pesos, and any payment of credit card debt of $20,000 pesos made at a time. SAT may also audit you and compare your credit card expenditures to your declared income.

I'm glad that they're finally eliminating this tax which proved to onerous to those who aren't the intended targets of the original legislation. I feel like I get a better rate at an ATM than I do wiring money to Mexico or even attempting to cash a check. With a wire there is also at least one fee for receiving the money and those without free international wire service get hit on the sending side.

In addition, banks in the US require that you to disclose what you're going to do with the money as part of the international wire instructions. If you withdraw cash when you think the exchange rate is good, no bureaucrat in the US knows what you're doing with your own money.

As expats, depositing cash in excess of $15,000 which will trigger reporting to SAT should not cause any problems, at least I can't think of any. Am I missing something I should be concerned about?

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The SAT once sent us a note to go and see them and explain something about some money we received , we did and they entered in their records that we were retirees and did not earn income in Mexico and that was the end of it. I do not see it a problem that the cash is reported to the SAT, We may be ask to explain another ime but I do not think it will be a big deal but only the future will tell for sure.

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It may be an issue now as with the reforms they can notify you by email letting you know you need to login to get a notification and if you do not so so within 3 days on the 4th day you are notified and then you have 20 days to prove the deposits were not undeclared income and if the time passes they can start collection action and lien and seize your property. The burden of proof is with the taxpayer and you are guilty until proven innocent which violates the constitution and international treaties.

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It may be an issue now as with the reforms they can notify you by email letting you know you need to login to get a notification and if you do not so so within 3 days on the 4th day you are notified and then you have 20 days to prove the deposits were not undeclared income and if the time passes they can start collection action and lien and seize your property. The burden of proof is with the taxpayer and you are guilty until proven innocent which violates the constitution and international treaties.

The one problem I see for those acquiring an RFC online is that you are not given a password to the SAT portal in order to verify your information which includes an email and physical address. I you don't receive any notifications due to missing or incomplete information then there could be potential problems as you describe.

There might be a way to request a password on the SAT site but that would probably take a lot of digging. I had to go into the SAT office in Guadalajara last year in order to try to obtain a refund for an INM payment so the clerk collected all my information and when the account was created I was able to select a password.

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Yes, this is an issue to change your address although with the laws new buzon tributorio they will send email notifications. At least it saves one trip to Guadalajara, looking on the bright side

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Thank you for this summary, Spencer. With regard to sales of real estate and capital gains, do I understand correctly that if the gain is less than roughly 3,500,000 pesos there is no cap gains tax?

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Pertaining to the RFC #. If you already have a bank aget one/ccount would this be a problem? Would you still be required to

I didn't think I had an RFC number, but when looking at a printed bank statement (HSBC) for an account I've had for seeral years, I see the bank assigned one to me -- apparently when the account was opened (?). So have a look -- you might already be covered.

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The bank fabricates RFC numbers as only SAT can issue official ones, if you go to the SAT page to request an RFC number and attempt to get one but already have one then it will tell you so, check at https://siat.sat.gob.mx/PTSC/inscurp/

Watch out for CURP and RFC numbers that were fabricated by transito or a bank as they are not official.

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