Mario Barrera Quoted in Tax Analysts 2020 on Tougher Tax Enforcement for Mexican Companies

“Tax Woes of Major Mexican Companies Signal Tougher Enforcement”

Recent announcements by three major companies of significant negative developments in their tax disputes with Mexican tax authorities are, according to analysts, an indication of tougher enforcement actions by the government.

…Mario Barrera, a tax partner with Thompson & Knight in Mexico City, said the SAT has been taking more aggressive positions in tax audits. “They are also [applying] much higher standards so that a given piece of evidence may actually prove a given fact or pass a test,” he said. “This is particularly true in areas that typically affect large or multinational companies, such as transfer pricing.”

Barrera gave as an example the materiality test that is used to determine whether a service was actually rendered or goods were delivered so that the payment made for the service or goods can be taken as a deductible expense. “The standard that the [tax] authority has adopted to prove materiality — particularly with regard to services rendered between related parties — is really hard to meet, and sometimes it departs from the reality of the speed at which business needs to be conducted,” Barrera said. “This often results in large contingencies as the ones we
are seeing today.”