Basham, Ringe y Correa, S.C.
  July 22, 2005 - Mexico

Value Added Tax Credit

As mentioned in our information bulletin of June 8, on June 7, 2005 the Federal Official Gazette published an “Executive Order to Amend the Value Added Tax Law” which altered the procedure for calculating the crediting of valued added tax by removing operations not taxable. The Chamber of Deputies of Congress agreed with the views of the Treasury Department to the effect that including operations not subject to valued added tax distorted the proper calculation of the tax credit and therefore passed the amendments referred to. Although the amendments were intended to correct problems in the calculation of the tax credit by allowing taxpayers to pay the tax in a manner more closely related to their capacity to pay, we consider that various provisions of the new regime continue to be unconstitutional for violating the requirements of proportionality, fairness, and legality set out in Article 31(IV) of the Constitution. Based on the foregoing, we suggest filing an amparo claim against the new procedure for calculating the tax credit. This must be done within the 15 days following the submission of the return for the month of June 2005, something that will take place, in most cases, in July. If the return was submitted on July 18, the period for filing the claim will expire on August 8, 2005. We should mention that this strategy also applies to those who submitted an amparo claim against the procedure for calculating the tax credit with respect to the legislation in force from January 1 to June 7, 2005. The lawyers in our Tax Practice Group would be pleased to provide further information with respect to the foregoing.