In September 2016, Mexico’s tax authority (the SAT) implemented electronic audits to review discrepancies between taxpayers’ e-invoicing and e-accounting reports and taxes paid. Just two months later, the SAT touted the program’s initial successes, and now, it has announced the first resolution under its new electronic audit mediation process.
These e-audits are the latest in an ongoing effort by Mexico to eliminate tax fraud and maximize revenues. As a testament to how serious the SAT is taking tax matters, Reuters reports that one Spanish multinational currently has more than 20 open audits in Mexico. The telecommunications giant was able to combat one $1.4 billion USD bill, and is working through the mediation process on others; however, that initial mediation took almost three years.
Now, under the new e-audit system, no errors or discrepancies will fall through the cracks, but the government is set to remediate these instances quickly – for companies that have the right data and audit defense trail. Multinationals, even those still under amparo, need to be aware of Mexico’s updated mediation processes to prepare for a defense in the case of an audit. Though companies with an amparo may be excused from certain electronic reporting requirements, they are not immune from audits. Accurate, accessible eContabilidad reporting is the only way to defend against audits and avoid years of hassle and legal fees.
The SAT’s first resolution is the perfect example of how this remediation process can work when companies have the right reports at their fingertips. Unlike the 3+ year audit of the Spanish multinational mentioned above, the e-audit resolution took only 33 days. To illustrate, let’s examine the electronic mediation process this company went through, step-by-step:
- Step 1: On November 22, the business received a provisional determination of debt via its electronic tax mailbox of $38,903 USD (797 million Pesos) due to discrepancies identified in its 2014 reported income taxes.
- Step 2: The taxpayer immediately filed a request for a conclusive agreement, at which time the audit was suspended and sent to mediation.
- Step 3: The taxpayers’ defense attorney’s office, the PRODECON, initiated the mediation. During the procedure, the taxpayer had the opportunity to work with the tax authority in proving errors were unintentional. Armed with detailed accounting data, the company was able to quickly supply the necessary documents in support of its defense for review.
- Step 4: The resolution (Acuerdos Conclusivos), which was reached in just 33 days, found that the SAT should receive the tax payment that was legally due – however, the taxpayer was only required to pay 20% of the initial fine levied - $7,761 USD (159 million Pesos). Without the electronic data needed to support its defense, the business could have potentially spent a number of years and countless legal and accounting fees to avoid the initial $39K determination of debt.
Mexico’s unique approach to resolving audits allows taxpayers to avoid long and costly judgments, provides legal certainty in such matters and offers transparency for all parties involved – if companies have the solutions and processes in place to help them remediate quickly. The frequency of audits is bound to increase now that Mexico has moved to electronic processes, and the government is working with companies to resolve discrepancies quickly. Is your company equally prepared for swift audit defense and remediation? See how electronic reporting allows multinationals to improve accuracy and efficiently defend against audits within your existing ERP system.
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