Mexico's Dictamen Fiscal Is Similar to New Fin 48 in the US

Excerpt from Practical Mexican Tax Strategies
Published by WorldTrade Executive, Inc.

By Steve Axler & Dinorah Gonzalez
(Halliburton)

One of the concerns resulting from the introduction of FIN 48 for many in-house tax practitioners, especially for US based multinational companies, is that the US Internal Revenue Service would now essentially have a road map to various tax positions taken by the taxpayer. However, the disclosure of tax positions to the tax authorities is not a new or unusual event in Mexico. In fact, for large taxpayers in Mexico this is an annual occurrence. known in Spanish as the Dictamen Fiscal.

Often simply referred to just as “the Dictamen”, this a tax audit of a Mexican legal entity or person that carries out business activities or any foreign residents with a permanent establishment in Mexico. The Dictamen Fiscal can only be performed by a registered and certified Mexican public accountant. Upon completion of the Dictamen, the accountant will issue a report which will be filed with the Mexican tax authorities (Servicio Administración Tributaria or “SAT”) stating whether, according to the applicable tax regulations and audit standards, the taxpayer has complied with its obligations. The public accountant is required to sign the Dictamen under penalty of perjury.

It cannot be emphasized enough the influence that a Mexican statutory auditor has regarding the tax positions taken by a taxpayer in Mexico. A trap for a new or unsophisticated investor in Mexico is to execute a reorganization or to take an uncertain tax position without first discussing this with the auditor. In the best circumstances, if the taxpayer has not discussed the transaction with the auditor before the Dictamen review begins, much time, effort, expense and stress will be incurred in getting the auditor comfortable with the transaction given the limited time frame the auditor has to understand the transaction and complete the Dictamen.

In the very worst scenario, the auditor may not agree with a position taken by the taxpayer and may not be willing to sign the Dictamen or will give a negative opinion. The taxpayer is then faced with the decision to unwind the transaction, find another auditor, or in the worst situation face a tax audit from the SAT. Consequently, the taxpayer will be in the difficult position to explain why there is a negative opinion or no Dictamen at all.

To learn more about the Dictamen Fiscal in Practical Mexican Tax Strategies

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