CCN MEXICO REPORT

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Issue #
70
 – 
October 2009

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The Department of Economy Proposes Amendments to the Automotive Decree

October 12, 2009

In order to support Mexico’s final automotive assembly industry, the Department of the Economy proposed aseries of amendments to the Decree for the Support of the Final Automotive Assembly Industry’sCompetitiveness and for the Stimulus of the Domestic Automobile Market (“Decreto para el Apoyo de laCompetitividad de la Industria Automotriz Terminal y el Impulso al Desarrollo del Mercado Interno deAutomóviles”) or Automotive Decree. The Automotive Decree, published on December 31, 2003, providesincentives to foreign automotive assembly companies operating in Mexico, so long such companies meet certaininvestment requirements, notably the annual production of at least 50,000 units within Mexico in order tomaintain such incentives. The proposed amendment to the Automotive Decree, which is currently under publiccomment before the Federal Commission of Regulatory Improvement (“Comisión Federal de MejoraRegulatoria” or “COFEMER”), proposes to renew the registration to such incentive program for companies thatproduce new light vehicles that meet, among other requirements, a production of 50,000 units or more during anyof the previous 3 years of the year on which a registration renewal is sought, and provided that such company hasnot suspended its manufacture of vehicles in Mexico for more than 3 consecutive months during the previousyear, and that such manufacture in Mexico does not show an annual decline that is larger than the decline incumulative sales of the market where at least 90% of the units produced in Mexico are destined. Furthermore,such company must have manufactured in Mexico 30,000 units or more in the immediately previous year. Theautomotive industry has expressed its approval of such amendment, thus, the expectation is that the ExecutivePower will approve the proposed amendments and announce their immediate implementation in the OfficialGazette of the Federation (“Diario Oficial de la Federación”).

Recent Case Decision – Effect of an Amparo Judgment on Tax Rules

October 12, 2009

Mexico’s Supreme Court of Justice published recently case decision number 2a./J.93/2009, titled “Tax rule thatgrants benefits to certain taxpayers, excluding other taxpayers that are similarly situated from a legal standpoint. The effect of an amparo judgment ruling its invalidity is that it also benefits the plaintiff.” In this case precedent,Mexico’s Supreme Court of Justice held that constitutional protection of amparo proceedings aimed atchallenging a tax rule that benefits certain taxpayers and excludes others similarly situated, and where there is afinding that there is a violation of equity principles in the challenged law, would extend the same benefits thatsuch specific taxpayers enjoy under such challenged law to the plaintiff. This case decision is relevant becausethe unconstitutionality of a challenged rule will not eliminate the effects of such rule with respect to the taxpayersto whom such rule applies, but will allow a plaintiff to receive the benefits granted under such challenged legaldisposition.

Recent Case Decision – Recording Fees

October 12, 2009

Mexico’s Supreme Court of Justice published recently case decision P./J. 95/2009, titled “Recording Fees.Federal or local laws setting a fee based on the value of the transaction that gave rise to the recording, violate thetax collection principles of proportionality and equity.” In such precedent, Mexico’s highest court holds that feespaid to the treasury of the State are in consideration for administrative services rendered by the government to theindividuals that request such services in accordance with applicable tax collection doctrine and laws. The Courtexplains that such fees satisfy the tax collection principles of proportionality and equity provided in Mexico’sConstitution when: i) there is a reasonable balance between the fee collected and the service rendered; and, ii)those receiving the same type of service are treated equally. Given the above, the Highest Court ruled that thefederal or local laws that set fees for the registration, entry, cancellation or issuance of certificates with legalsignificance or public registry instruments on the basis of a percentage or a factor applied to the economic ormarket value of a transaction violate the tax collection principles of proportionality and equity when individualspaying such fees pay a greater or lesser amount depending on the value of the transaction that gave rise to suchrecording. Thus, such illegal fees lead to a situation in which a service that costs the governmental agency thesame to provide results in different payment amounts of recording fees depending on the value of the underlyingtransaction. This recent case decision opens the possibility to challenge unjustified recording fees set by thevarious public registries across Mexico which base such fees on the value of the transaction and not in terms ofthe cost to render such service.

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October 12, 2009
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Recent Case Decision – Recording Fees
October 12, 2009
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