On July 6, 2016, the Mexican Supreme Court of Justice, ruling on a case litigated by Mancera, the Mexican member of EY/Global, issued a final decision on the constitutionality of new electronic accounting obligations, declaring certain provisions unconstitutional and validating others.

Background

As a consequence of the 2014 tax reform, Mexican taxpayers must maintain electronic accounting records and electronically file some of them with tax authorities on a monthly basis.

Additionally, in 2014, tax authorities initiated a new "electronic audit," in which they used a taxpayer's electronic information and documentation to generate a preliminary tax assessment and then notified the taxpayer of the assessment through an electronic mailbox. The taxpayer had 15 days following the notification to produce evidence refuting the assessment or pay the taxes assessed.

If the taxpayer did not file evidence refuting the assessment within 15 days, the preliminary tax assessment became final and tax authorities could collect the assessed tax through administrative procedures.

Several companies challenged the constitutionality of the new obligations and audit procedure through a constitutional trial (amparo contest).

Ruling

The Supreme Court held that the obligations to keep and send accounting records electronically were valid and legal. The technical guidelines for submitting those records (Annex 24 of the Administrative Tax Rules for 2015), however, violated the constitution's principle of legal certainty because they were not created by the tax authorities and were written in a foreign language. Therefore, taxpayers will not be required to file new or previously unfiled accounting records electronically until the tax authorities modify the technical rules.

Additionally, the Court held that tax authorities could not collect taxes from taxpayers that received preliminary assessments, but failed to object in time. Although tax authorities changed this provision in the electronic audit rules for 2016, the Court's reasoning could still apply to the provision currently in force.

Finally, the Court held that the electronic tax drop-box was constitutional and must be used by taxpayers for submitting any kind of writ, petition, informative reports or requests to tax authorities, as well as any report responding to tax authorities' information requests.

Next steps

Currently, the Supreme Court has ruled only on the constitutional trial, so its holding in this case is not binding precedent (jurisprudence) for other cases. If five cases are resolved the same, however, the holding will be jurisprudence and could apply to other taxpayers challenging the constitutionality of the electronic accounting obligations and audit procedures (i.e., could be a basis for granting amparo protection in subsequent cases).

When the Supreme Court of Justice issues the final resolution, we will make a detailed analysis and broaden our comments.

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