1. What is the most significant change to your region/jurisdiction’s tax legislation or regulations in the past 12 months?
The most significant change in legislation continues to be the approach of the tax authorities within the Latin American countries in general, which is focused on tax collection-intensive activities and initiatives that reinforce their auditing capabilities and reduce trade and tax facilitation benefits.
2. What has been the most significant impact of that change?
Mainly, the increase in foreign trade audits with a higher level of complexity and aggressiveness that yield a greater level of tax collection from the government.
Also, the increased difficulty in obtaining authorisation, trade permits, or import and export licences impacts trade facilitation in Latin American countries.
Finally, the complexity around formal or informal approaches with the authorities to find ways to comply, understand their aggressive positions, or even self-correct complicates trade and trade operations.
3. How do you anticipate that change impacting your work and the market moving forwards?
It represents an opportunity to increase the demand for strategic advisory services. The need for specialised advisory services to support companies in navigating an over-regulated, uncertain, and disruptive environment becomes more evident.
4. How has this changed the way you offer tax advice?
It requires additional involvement efforts within the advisory process, creativity with respect to approaching the government, and the use of technological tools to develop better capabilities to meet clients’ expectations.
The reason why we have a coordinated strategy within our S-LATAM regional firm with standardised services is to offer the same quality and centralised points of contact to improve the service experience.
5. What potential other legislative/regulatory changes are on the horizon that you think will have a big impact on your region/jurisdiction?
Currently, the USMCA [the United States–Mexico–Canada Agreement], being the most important trade agreement in the region, is about to start negotiations. The changes will impact not only Mexico but also most Central American countries and other supplying jurisdictions around the world.
6. What are the potential outcomes that might occur if those changes are implemented?
Increase in the level of regional content to qualify for origin and preferential duty treatment.
Request for more legal certainty from the US and Canada to Mexico.
Revision of the agreement in general.
As a consequence, the nearshoring trend could be expedited, as it may create an opportunity for more direct investment to be located or relocated in Mexico to qualify for the new rules of origin and meet the USMCA content requirements.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Yes, since part of the service portfolio of our practice is to offer integral support for new companies opening operations in the region.
8. Are there any regulatory/legislative changes you believe should be implemented in your region/jurisdiction?
Trade simplification, regulations based on risk analysis, and foreign investment attraction instruments.
9. How do you believe those changes would help improve the tax landscape in your market?
The attraction of direct foreign investment and mitigation of the current disruptive environment in the supply chain in general.
10. How are issues surrounding the taxation of the digital economy affecting your work?
The lack of definitions around e-commerce still impacts day-to-day transactions, creating interpretation discrepancies and liabilities.
Specific digital transactions are not included in the local legislation of the S-LATAM jurisdiction. This presents significant challenges, especially for e-commerce marketplaces. For example, reverse logistics, in most cases, have an impact on cost or are even considered showstoppers, as performing such procedures could represent a lack of legality or compliance.
11. How would you describe the tax authorities’ approach in your region/jurisdiction?
Aggressive. Very aggressive. Their main focus is on tax collection, with a form-over-substance approach.
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E: cmontanohernandez@deloittemx.com
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