Materiality of Foreign Trade Operations in light of Article 59, Section IX, of the Federal Fiscal Code (CFF).

Article 59 of the Federal Fiscal Code is included in Title Three, titled ‘On the Powers of Tax Authorities.’ This legal provision is one of several that grant the tax authority the power of presumption in the exercise of its verification powers. Presumption is understood as the ability to assume, suspect, conjecture, or judge by induction[1].

The tax presumptions contained in the Federal Fiscal Code are also known as the “general system of tax presumptions.” These were granted to the administrative authority to enhance the exercise of its auditing powers, as established in Article 42 of the Federal Fiscal Code.

An audit action may result from a random selection or from an indication or background that justifies the review, such as the omission of an obligation, discrepancies between filed tax returns, or suspicions of the commission of a tax offense.

Audit powers are the authorities’ legal capacities to verify compliance with tax obligations. Article 42 of the Federal Fiscal Code establishes the authority to carry out the following audit actions:

• • DESK AUDITS: This is a review conducted by the Tax Administration Service (SAT) at its own offices, meaning it is carried out internally at the authority’s desk or department, following a request for information from the taxpayer. The tax authority notifies the taxpayer of the information and accounting records required through the tax mailbox, specifying the location and deadline for submitting the requested documents.
  • FIELD AUDITS: This type of audit is conducted at the taxpayer’s registered tax address, as stated in their tax status certificate with the Tax Administration Service (SAT). This may be a business establishment or commercial premises. During the visit, the tax authority may request information and accounting records.
  • RECALCULATIONS: This review is conducted by the tax authority based on the information contained in its own database, including tax returns, requests, notices, and other data provided by the taxpayer. These recalculations may lead to invitations to correct the taxpayer’s tax situation, formal requests for information, or the initiation of a field audit or desk audit.
  • INVESTIGATIONS: This refers to the authority’s power to request information from third parties to verify the accuracy of the information provided by the taxpayer. It may also involve requesting information from officials, public employees, and notaries.
  • ELECTRONIC AUDITS: This refers to the review conducted by the tax authority using new information technologies. The audit is carried out through the tax mailbox, and neither party’s presence is required, as everything is sent and received digitally.

Through auditing methods, the tax authority seeks to detect discrepancies that may exist in the documentation and information provided by the taxpayer. In the cases outlined in Article 59, through these auditing methods, the authority aims to verify that the export transactions of goods declared by the taxpayer as exported have indeed been carried out. The aforementioned article establishes that the authority may presume that the goods were sold within the national territory and not exported when the taxpayer fails to provide the documentation or information requested by the tax authority.

Thus, based on Article 59 of the Federal Fiscal Code, the authority has the power to request documentation and information in order for the taxpayer to prove:

1. 1. The material existence of the transaction for the acquisition of the goods in question, the raw materials, and the installed capacity to manufacture or transform the goods that the taxpayer declares to have exported;
   2. The means to store the goods that the taxpayer declares to have exported or the justification for why such storage was not necessary.
   3. The means used to transport the goods to foreign territory. If the goods were not transported, the taxpayer must demonstrate the conditions of their physical delivery and the identity of the person to whom they were delivered.

If the taxpayer fails to provide the requested information and documentation to prove the above, the authority may presume that the goods were sold within the national territory and were not exported.

The SCJN (Supreme Court of Justice of the Nation) has established that within the general system of tax presumptions, the following subsystems of presumptions can be identified. This is because not all the rules are intended for the same situations or to produce related legal effects.

We then have the following subsystems:

• • General subsystem of presumptions in the event of obstruction of the tax authority’s action. It consists of the provisions contained in Articles 55, 56, and 61 of the Federal Fiscal Code (CFF).
  • Particular subsystem of presumptions in the event of the risk of concealing income, actions, activities, or assets. It consists of Article 59 of the Federal Fiscal Code (CFF).
  • Subsystem of specific cases. It consists of Articles 57, 60, and 62 of the Federal Fiscal Code (CFF), and
  • Subsystem of international cooperation. It consists of Article 54 of the Federal Fiscal Code (CFF).

In addition to the above, Article 59 of the Federal Fiscal Code (CFF) establishes a particular subsystem of presumptions in the event of the risk of concealing income, actions, activities, or assets.

Through Article 59, the legislative branch considered various situations that could indicate a risk that the taxpayer may intend to conceal or hide information or data revealing the obligation to pay taxes. Therefore, through Section IX of this legal provision, it granted the tax authority the power to presume the following:

• • That the goods the taxpayer claims to have exported were actually sold within national territory and were not exported when the taxpayer fails to present, upon request by the tax authorities, the documentation or information proving any of the following circumstances:

1. 1. The material existence of the transaction for the acquisition of the goods in question or, if applicable, the raw materials and the installed capacity to manufacture or transform the goods that the taxpayer claims to have exported.
   2. The means used by the taxpayer to store the goods they claim to have exported or the justification for why such storage was not necessary.
   3. The means used by the taxpayer to transport the goods to foreign territory. If the taxpayer did not transport them, they must demonstrate the conditions of their physical delivery and the identity of the person to whom they were delivered.

In this section, the legislator established that the presumption will apply even if the taxpayer possesses the export declaration documenting the dispatch of the goods.

Thus, the primary purpose of Article 59 is to identify risk behaviors among taxpayers who attempt to conceal from tax authorities information or data that reveal the obligation to pay taxes. This is considered a risk behavior because such actions or omissions do not necessarily indicate an intentional effort to conceal information. This is due to the fact that Article 59, in its first paragraph, states that these presumptions operate on a relative basis (iuris tantum), meaning they constitute a legal presumption that requires a fact to be accepted as proven in a legal proceeding unless evidence to the contrary is presented.

Under these considerations, the taxpayer must retain and may present to the tax authority, in addition to the export declaration documenting the dispatch of the goods, various forms of evidence proving that the transfer operation was carried out. These may include the CFDI (Digital Tax Receipt), payment receipts for the transportation used, proof of expenses incurred for the transfer, shipping documents, records or controls of the physical departure of the goods from the company’s warehouse or its subcontractors, or a document confirming the delivery of the goods to the recipient.

In accordance with thesis VIII-P-1aS-472 issued by the First Section of the Superior Chamber of the Federal Court of Administrative Justice, the presumption of income established in Article 59, Section IX, of the Federal Fiscal Code is rebutted when the taxpayer demonstrates the material existence of the transaction for the acquisition of the goods, as well as the means used to transport them to foreign territory. The Superior Chamber determined that since the presumption established in Article 59, Section IX, allows for evidence to the contrary, the taxpayer may refute it by presenting invoices issued by the supplier of the acquired goods, along with the corresponding payment receipts—such as bank transfers from the taxpayer’s account to the supplier’s account. Additionally, the taxpayer may submit the Export Declaration, INCOTERMS, Bill of Lading, Waybill, maritime cargo insurance policy, and the Booking Reservation, as these documents can serve as evidence of the means used to transport the goods abroad or the conditions of their physical delivery.

Since the relevant laws do not provide a definition of materiality or specify the appropriate documents to prove the materiality of transactions, tax authorities often act arbitrarily, excessively exceeding their powers by refusing to recognize the evidentiary value of the documents presented by the taxpayer.

It should not be overlooked that the tax authority cannot demand evidence that is inconsistent with the nature of the verified transaction or that is excessive, as the required means of proof must adhere to standards of reasonableness and objectivity. The burden of proof cannot impose impossible extremes, and the evidence presented should be accepted if it is sufficient to rationally demonstrate the materiality of the disputed transaction.

Under these considerations, when the tax authority exercises its audit powers in accordance with Article 59, Section IX, it is essential to present the invoices issued by the supplier of the goods acquired by the taxpayer and corroborate them with the corresponding payment receipts, such as bank transfers from the taxpayer’s account to the supplier’s account. Additionally, documents such as the Export Declaration, INCOTERMS, Bill of Lading, Waybill, shipping list, warehouse entry and exit records, among others, should be provided. Through these documents, the taxpayer can demonstrate the materiality of the transactions and challenge the tax authority’s presumption.

If the tax authority refuses to recognize the evidentiary value of the aforementioned proof, the taxpayer may choose to pursue the appropriate legal remedies.

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