Recent Case Decision

February 23, 2007
Recent Case Decision

Joint and Several Liability of Shareholders or Members of Mexican Entities. In accordance with Article 26 (sections III andX) of the Fiscal Code of the Federation, joint and several liability of members or shareholders of Mexican entities existswhen taxes are generated from cases in which the entity: a) has not registered itself in the Federal Taxpayer Registry; b)changes its tax domicile without presenting the corresponding notice of such change; or c) fails to maintain accountingrecords or hides or destroys such records. According to the Fiscal Code of the Federation, liability may arise during the timethe shareholders or members maintain their holdings, but such liability may not exceed the amount of their investment in theentity’s capital, and such liability exists to the extent the taxpayer entity does not have assets to guarantee payment of thecorresponding tax. This said, a recent judicial decision establishes that in order to compel joint and several liability ofmembers or shareholders, one must know the amount of the entity’s capital and the corresponding participation of eachshareholder at the time their investment was made. This would tend to limit their joint and several liability, as such liabilitywould be based on the amount of their investment participation in the taxpayer entity’s capital when the tax liability inquestion originated, not when the authorities imposed the tax. See SECOND COLLEGIATE COURT OF THE FIFTHCIRCUIT. Tax Appeal 91/2004. Department of Finance and Public Credit and others; September 8, 2005. Unanimous Vote.Decision Author: Roberto Ramírez Ruiz. Secretario: Braulio Pelayo Frisby Vega

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