Field visits in tax matters.

The authority to conduct visits to taxpayers, jointly liable parties, or third parties related to them, as provided in Section III of Article 42 of the Federal Tax Code, serves as a tool for tax authorities to verify compliance with tax and customs obligations. This helps prevent potential acts of evasion or avoidance, making this verification power a cornerstone in building a solid and equitable system.

For decades, field visits, as well as desk or office reviews provided for in Section II of the same Article 42, have been key tools for tax authorities in verifying that taxpayers meet their substantive and formal obligations. When non-compliance is detected, these measures allow authorities to encourage taxpayers to correct their tax situation or ensure compliance with any tax obligations identified during the review process.

Thus, through this article, we will explore the various stages that make up this audit process, from its planning to the communication of the results to the taxpayer, with the aim of thoroughly understanding its relevance in the current context.

As previously stated, the tax authority’s power to conduct field visits is regulated by the Federal Tax Code and may be exercised by both the federal tax authority—specifically, the Tax Administration Service (hereinafter SAT)—through its central and decentralized audit departments, as well as by state entities coordinated in federal revenue matters. These entities are authorized to carry out such visits under the tax collaboration agreements signed between the Federal Government, through the Ministry of Finance and Public Credit, and the local governments of the federal entities.

The planning of these visits is initially carried out by SAT’s programming department, which requests the relevant department to initiate the audit procedure for a specific taxpayer.

Once this process is completed, the tax authority must issue the official notice initiating its auditing process, legally known as the audit order. This order must comply with the legal requirements of proper justification and reasoning. Additionally, it must be issued in writing and include the date and place of issuance, the name of the recipient, the location where the visit will take place, the designation of the personnel conducting the visit, the requested information and documentation, the taxes under review, the audit period, and the handwritten or digital signature of the issuing official.

Afterward the taxpayer must be formally notified of the audit order through the tax inspection notice (Acta Parcial de Inicio), which marks the official beginning of the field audit procedure. In this report, the authorized auditors assigned to the tax authority must first fully identify themselves to the individual handling the procedure by presenting their official credentials before entering the premises. They must then request the presence of the audited taxpayer or, if applicable, their legal representative or an authorized representative. If the taxpayer or representative is present, the audit procedure will proceed immediately.

If the taxpayer is not present at the address, a notice must be left, scheduling a follow-up visit for the next business day at a specified hour. If, upon the second attempt, the taxpayer is still not present, the audit order will be formally given, and the visit will proceed with whoever is present at the location. A detailed record of all actions taken during the procedure must be documented.

Likewise, the designation of witnesses is a legal requirement. The auditor must request that the taxpayer appoint two witnesses to verify the events during the audit. If the taxpayer refuses to appoint them, the auditor must designate them instead. If the witnesses fail to appear, leave during the procedure, or voluntarily express their unwillingness to continue, they may be replaced by the taxpayer. If the taxpayer refuses or is unable to do so, the authority will appoint replacements.

Once this process is completed, the tax authority may request the audited taxpayer to provide the documentation and information related to the accounting records under review for the specified periods and taxes outlined in the audit order.

The documentation and information requested by the tax authority must be provided within the timeframes established in Article 53 of the Tax Code: “immediately” for books and records that are part of the accounting system, as well as diagrams and designs of the electronic recording system, when requested during the audit visit; “six days” from the date the notification takes effect for documents that the taxpayer is required to have on hand and are requested during the visit; and “fifteen days” from the day following the date the notification takes effect for all other cases.

It is important to note that the tax authority may grant taxpayers an additional ten-day extension beyond the original deadline for submitting documentation when the requested reports contain information that is difficult to provide or obtain.

Following the same formalities as before, tax authorities may issue partial or supplementary reports to document facts, omissions, or circumstances that may indicate noncompliance with tax regulations.

In this regard, if during the audit visit the reviewing authority becomes aware of facts or omissions that may indicate noncompliance with tax regulations, as well as facts or omissions reported by third parties, these must be documented in detail in interim reports.

In addition, during the audit visit, the tax authority must notify the taxpayer, their legal representative, and, in the case of legal entities, their governing bodies through the representative, at least ten business days before the issuance of the final interim report. This notification informs them of their right to visit the offices handling the procedure to review the facts and omissions identified during the audit.

After the ten-business-day period mentioned in the previous paragraph has elapsed, the tax authority must issue the Final Interim Report, documenting the facts and omissions that may indicate noncompliance with tax regulations. The taxpayer will then be informed that they have twenty days to present arguments and submit any evidence to refute the identified findings or, alternatively, to rectify their tax situation.

The twenty-day period must elapse before the Final Report can be issued. If the audit covers more than one fiscal year or a portion thereof, this period may be extended, provided the taxpayer submits a prior request within the granted twenty-day timeframe.

After at least twenty days have passed since the issuance of the final interim report, the Final Report will be prepared, detailing the facts and omissions detected by the auditors during the field visit. This will also include the authority’s assessment of any documents or reports obtained from third parties during the visit, if applicable, as well as the documents, books, or records presented by the taxpayer within the granted period to refute the facts or omissions mentioned in the final interim report. This assessment will cover the suitability and scope of the referenced documents, books, records, or reports, based on analysis, review, comparison, evaluation, or appraisal, whether individually or collectively, to determine whether they refute the mentioned facts or omissions.

If, before the closure of the Final Report, the taxpayer fails to present the referenced documents, books, or records, or does not specify their location (provided it is the taxpayer’s registered address or the authorized place for keeping accounting records), or does not prove that these are in the possession of a tax authority, the facts documented in the reports issued during the field visit will be considered as accepted.

Thus, it is clear that during the field visit, there are three significant and mandatory reports to be issued: the initial inspection notice , the final interim report, and the final report. These actions must be carried out by the tax authority within a maximum period of twelve months, starting from the notification of the audit order and ending with the issuance of the Final Report.

Subsequently, the tax authority has a period of six months to issue the corresponding resolution, which will begin to be counted from the issuance of the Final Report, in accordance with Article 50 of the Federal Tax Code.

Considering the procedural stages outlined, it is evident that the tax authority has a maximum period of one year and six months to audit the taxpayer and issue the corresponding resolution. It is important to note that the first period may be extended in specific cases, as previously outlined in the law.

The field visit audit procedure is one of the powers granted to the tax authority to review the proper compliance with the substantive and procedural tax obligations of taxpayers. These taxpayers will need the guidance of experts from the very beginning of the audit to establish a proper fiscal strategy. This is particularly important since many of the unfavorable outcomes at the conclusion of these procedures arise from the implementation of incompatible or inadequate decisions or strategies, often due to a lack of understanding of the scope of the information and/or documentation used to address the actions of the auditing authority.

At ST Stratego, we have extensive experience in successfully resolving these types of procedures, as we specialize in legal defense in fiscal and customs matters. Our in-depth knowledge of both the public and private sectors is backed by a significant number of cases successfully resolved