For Mexican entities approving capital stock increases or decreases occurring December 31, 2020 or before, Article 30 of the Mexican Federal Tax Code provided that taxpayers were required to maintain records of all minutes and certificates relating to such transactions. However, beginning January 1, 2021, Mexican tax authorities now may require additional information from Mexican entities evidencing the economic substance of the increases or decreases in their capital stock.
Accordingly, taxpayers who increase their capital stock through the capitalization of liabilities must, in addition to keeping accounting records, meeting minutes, account statements and, where appropriate, appraisals of the goods contributed, maintain a document certifying both the accounting existence of the liability in question and its value. Such certification must comply with Rule 18.104.22.168. of the Miscellaneous Tax Resolution for 2021, which requires that said certification be issued by a Registered Public Accountant and that it contain the following, among other items:
- Origin of the capitalized liability. In the case of liabilities arising from transactions with suppliers, a statement that the internal control verification of the legal entity was carried out in a reasonable manner to conclude that the goods were effectively acquired and delivered and, in the case of the provision of services, that such services were actually received by the taxpayer.
- Indication as to whether the capitalized liability complies with the Financial Reporting Standards C-9, C-11 and C-19 and their correlative provisions, or with the International Financial Reporting Standards, as applicable to the taxpayer.
- Documentation evidencing the actual delivery of the resources that were the object of the obligation of the capitalized liability. In the case of loan or financial instruments, the calculation of the accrual of interest must be validated, while for debt financial instruments in which their value is determined according to the reasonable value method, the methodology used to calculate its value.
- Date and value of the initial recognition of the liability and, where appropriate, the increases or decreases that support the debt on the date of its capitalization.
- Number and value of the shares or membership interests that were granted as a result of the capitalization of the liability in question, as well as information from the meeting minutes in which such liability was capitalized, and all the commercial folios relating to the protocolization of meeting minutes.
It is important for taxpayers to consider the new rules above when increases in capital stock will be made by means of the capitalization of liabilities so that taxpayers can avoid potential fines in the event of a review by Mexican tax authorities.