By – Lic. Leobardo Tenorio.
The Tax Administration Service (“SAT”) is reviewing, analyzing and, in certain cases, auditing the operations of taxpayers with their suppliers.
With electronic invoicing, SAT can easily cross-check information regarding operations between customers/suppliers. Although SAT is mainly reviewing operations of companies that are considered by SAT to be Simulated Trading Companies, or “EFOS” as they are commonly known, it is also reviewing to ensure that payments to suppliers are justified.
The main characteristics of the “EFOS” are that they do not have the personnel and they do not have infrastructure or assets to carry out the operations for which they invoice, as well as that
- They have a broad corporate purpose.
- Issue electronic invoices (or CFDI) for operations, not actually carried out.
- The income that they receive is disproportionate, taking into consideration is the characteristics of their operation.
- They open bank accounts and cancel the same after a short period of time.
- Their tax address is not the same as that indicated in their Federal Taxpayers Registry (RFC).
- During a certain period of time, they can be located by the SAT, but subsequently, they disappear.
- At the end of the fiscal year, their annual tax return shows that the income and expenses are very similar.
- They share tax domiciles with other taxpayers.
In operations with possible EFOS or suppliers, the SAT is analyzing, for the first time, the “materiality” and “the business reason” of the purchase of goods or services.
While it is true that “materiality” is not a legally defined term, such must be understood to be supporting documentation for the purchase of goods or services, with the operations having to comply with the principles of economic justification, reliability, accuracy, and verifiability.
On the other hand, “business reason” is understood, to be the genuine reason for which the purchase was carried out, beyond the fiscal implications. That is, if an operation is not carried out with the purpose of obtaining a profit, besides the tax benefit, the administrative or judicial authority will not recognize the taxpayer.
Based on these considerations, it is very important that all the operations carried out to comply with the “materiality” and “business purpose” requirements.
With regard to materiality, it is essential that the operations carried out be supported by contracts, purchase orders, delivery records, progress reports of services, etc. In the event of services, the form, the temporality and the “deliverables” of such services, and having such documentation available in the event of an inspection.
Failure to comply with the “materiality” and “business reason” requirements could have as a consequence that the expenses are considered by the SAT as “nondeductible”.
For any questions or comments, please do not hesitate to contact us.
Leobardo Tenorio-Malof | ltenorio@tplegal.net
Héctor Torres-López | htorres@tplegal.net
Alejandro Pedrín | apedrin@tplegal.net
Mauricio Tortolero | mtortolero@tplegal.net
Daniel Gancz-Kahan | dgancz@tplegal.net
Alejandro Ceballos | aceballos@tplegal.net
