Cancellation of Digital Seals: Causes and Reactivation Process.

The cancellation of digital seals is a measure implemented by tax authorities under the Secretariat of Finance and Public Credit (SHCP) to prevent and sanction improper practices in tax compliance. While this mechanism is necessary to ensure legality, it can present a significant challenge for affected businesses and individuals. This article explores the most common reasons leading to digital seal cancellation, the steps for reactivation, and the available legal defense options.

To begin, it is important to note that digital seals (CSD) are part of the technological tools used to authenticate and ensure the integrity of Digital Tax Invoices (CFDI) over the Internet.

Digital seals are certificates that allow taxpayers to issue invoices for services rendered or goods sold as part of their tax obligations. The Tax Administration Service (SAT) is responsible for canceling digital seals under various circumstances established in the Federal Tax Code (CFF) and miscellaneous regulations.

• • Irregularities in the Federal Taxpayer Registry (RFC): If the taxpayer cannot be located at the registered tax domicile or if their commercial activities cannot be verified at that location.
  • Non-compliance with tax obligations: Failure to file tax returns or make required payments repeatedly.
  • Tax discrepancies: Detection of serious inconsistencies in tax returns or issued CFDIs.
  • Simulated transactions: Being included in the list under Article 69-B of the CFF as an issuer of invoices for non-existent operations.
  • Refusal of audit powers: Obstructing a tax audit or home visit by tax authorities.

Consequences of Digital Seal Cancellation

As a consequence, digital seal cancellation prevents taxpayers from issuing invoices (CFDIs), directly affecting their operational capacity. This can lead to business activity disruptions, loss of clients, and reputational damage.

Digital Seal Cancellation Process

The cancellation process begins when SAT detects irregularities or non-compliance with the taxpayer’s obligations. The general process is as follows:

• • Notification: SAT issues an official notice informing the taxpayer of detected irregularities and the reasons for considering the cancellation of their digital seals.
  • Response period: The taxpayer is given a deadline to submit evidence and arguments proving they have not committed the alleged irregularities.
  • Evaluation of evidence: SAT reviews the provided information before issuing a final resolution.
  • Resolution: If the irregularities are confirmed, SAT issues a final notice confirming the measure and its effects.

Reactivation of Digital Seals

If SAT issues a resolution confirming the irregularities, the taxpayer’s digital seal certificate will be temporarily restricted. To reactivate it, a procedure must be followed to demonstrate that the irregularities have been corrected or clarified. The general reactivation process includes:

• • Identifying the cause: Reviewing SAT’s resolution to understand the reason for the digital seal restriction.
  • Correcting irregularities: Addressing the identified non-compliance, such as submitting overdue tax returns or clarifying questioned transactions.
  • Submitting a clarification request: Filing a formal clarification request with the tax authority, along with supporting documentation proving the correction of irregularities.
  • Responding to additional requirements: Providing any additional information requested by SAT in a timely manner.
  • Resolution: Once SAT reviews the corrections, it will proceed with reactivating the digital seals or, if necessary, confirming their cancellation.

Legal Defense Against Digital Seal Cancellation

If the tax authority decides to cancel the digital seal certificate, taxpayers can challenge the decision through various legal defense mechanisms, such as:

• • Appeal for Reconsideration (Recurso de Revocación): This appeal can be filed with SAT within 30 business days after notification of the cancellation. The taxpayer must argue the illegality of the measure and provide supporting evidence.
  • Administrative Litigation: If the appeal for reconsideration is unsuccessful or if the taxpayer prefers to take the case directly to court, they can challenge SAT’s decision before the Federal Administrative Justice Tribunal (TFJA) within 30 days.
  • Indirect Amparo (Amparo Indirecto): This legal action is applicable when the cancellation of digital seals violates fundamental rights, such as legal certainty or due process.

Preventive Measures for Taxpayers

To avoid these situations, it is essential to have proper legal advice to ensure compliance with tax obligations. Other preventive measures include:Periodically reviewing issued and received CFDIs to prevent errors or inconsistencies.Keeping the tax domicile and RFC information updated and notifying the tax authorities of any changes.

Conclusion

The cancellation of digital seals can severely disrupt a taxpayer’s business operations. However, by understanding the causes, following the correct reactivation procedure, and utilizing available legal defense mechanisms, it is possible to overcome this issue and resume normal activities. The best strategy to avoid these complications is prevention through responsible tax management.

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