With a view to the beginning of the last quarter of fiscal year 2023, at FRALLA we consider that it is the opportune time to begin carrying out a pre-closing of the annual ISR in order to estimate the fiscal result for the year and, where appropriate, take the pertinent measures.

Below, we mention some points that we consider relevant for the review of the pre-closing of fiscal year 2023 considering what the tax authority has recently prioritized in its reviews:

I. Determinación ISR – PTU 2023

a) Annual closing of 2023

At FRALLA we are at your service so that we can review together with your internal teams: i) the predetermination of the fiscal result for the year 2023, ii) the cumulative income, iii) the authorized deductions, iv) the determination of the PTU, v) the utility coefficient for provisional ISR payments for 2024
(if not in the RESICO regime), vi) determination of the annual adjustment for inflation and exchange gains/losses, or, vii) any other operation that could have an impact on the determination and payment of the 2023 ISR..

a) Likewise, we put our services at your disposal for the purpose of reviewing the operations and transactions carried out in this fiscal year in order to identify those that could have special treatment such as merger, spin-off, sale of some fixed assets, shares, distribution of dividends in in kind or without payment, loans for business reasons, among others; and likewise verify the documentary support of any corporate act carried out recorded in the minutes of the assembly considering the changes to current tax legislation.

b) Limitation on interest deduction

Due to the limitation on the deduction of interest that exceeds 30% of the adjusted tax profit in force as of fiscal year 2020, for the presentation of the 2023 annual income tax return in FRALLA we can help our clients determine if some of The non-deductible interest calculated for the years prior to 2023 may be deducted in the year 2023 or, in the determination of the non-deductible interest for the fiscal year 2023 and its effects on the annual adjustment for inflation.

b) Operations with foreign entities or figures

At FRALLA we would be able to review the current structure(s) maintained, as well as the foreign entities or figures that are part of it, in order to determine the applicable tax treatment, withholding rates , reason of business and materiality in the operations carried out, considering the reforms in recent years to the tax provisions regarding structures abroad, as well as operations through a structured agreement with related parties abroad with income subject to REFIPRE or hybrid mechanisms.

Regarding operations carried out with residents abroad, at FRALLA we are at your disposal in order to review the withholding rates used, issuance of the annual CFDI for payments with a source of wealth in Mexico and, where applicable, the withheld tax. to the resident abroad, review of the tax residence certificates for the year of the operation, CFDI’s issued abroad based on the facilities provided through the miscellaneous rule, origin of the flow, contracts entered into, materiality and business reason for each operation.

II Investments abroad held by natural persons

During the fiscal year 2023, various factors have occurred, such as the strengthening of the Mexican peso against the US dollar and the effect of inflation in Mexico, which have a very relevant fiscal effect for individuals who maintain investment portfolios abroad, for example. It is important to analyze each particular case prior to the closing of the fiscal year in order to foresee the effects that this will generate in terms of payment of taxes or generation of fiscal attributes in the annual declaration of the fiscal year that is presented during the month of April 2024.

Additionally, it is important to review, together with financial advisors, the tax effect that has been triggered by the behavior of the global market during the year 2023, as well as the tax regime that is applicable to each type of investment.

At FRALLA we have the wealth advisory area with extensive experience to support individual clients who maintain this type of investments personally or through structures abroad in a timely and preventive manner.

III. Transfer Pricing

Derived from the detail of information requested in this matter, as well as the high level of specialization that the tax authorities have obtained in matters of transfer pricing supervision, it has become essential to have thorough analyzes in this matter, both for national and international operations. abroad, so through an interdisciplinary vision between the area of tax consulting and transfer pricing, we offer, among others, the following services:

• Planning and diagnosis for new operations, which originally comply with transfer pricing legislation;

• Preparation of transfer pricing analysis to comply with the information and documentation requirements requested by domestic legislation and in accordance with international regulations such as the OECD Guides and the BEPS plan;

• Valuación de empresas, acciones e intangibles;

• Negotiation of advance transfer pricing agreements.

IV. Documentation Support and Certification of Liabilities

Within the reform of the tax legislation in force as of fiscal year 2021, it is anticipated that legal entities must have supporting documentation for the Contribution Capital Accounts (CUCA) and the Net Fiscal Profit Account (CUFIN), as well as the minutes of the assembly when they involve contributions in kind or capitalization of liabilities, reimbursements, payments of dividends in kind or without payment, among others. This documentation includes account statements, appraisals, loan contracts, etc.

Regarding tax losses to be amortized, we recommend checking that the authorized deductions comply with tax requirements, cross-checking with CFDIs, reviewing the materiality and deliverables received in the operations carried out.

At FRALLA we help our clients in the review and issuance of our recommendations for determining tax accounts (CUCA, CUFIN and tax losses) in order to review, confirm and, where appropriate, complement the supporting documentation that must be available. for this efects.

Regarding the capitalization of liabilities, it was included that there must be a certification that guarantees the accounting existence of the liability and the corresponding value; Such certification must be issued by a Public Accountant Registered with the SAT.

At FRALLA we have public accountants registered with the tax authorities who would be able to issue the corresponding certification for the capitalization of liabilities, as well as the ruling on stock purchase and sale operations.

V. Tax receipts

a) Proof of returns, discounts or bonuses.

As part of the 2022 Tax Reform, the provision was added that establishes that in the case of CFDI’s that cover expenses without having the justification and documentary support that proves the returns, discounts or bonuses before the tax authorities, said receipts cannot be reduced from the tax receipts of the taxpayer’s income, a situation that may be verified by the tax authorities in the exercise of their verification powers, so we recommend reviewing those operations for which said receipts of expenses were issued and, where appropriate, verifying the documentation that supports them.

a) Tax receipts of income

a) We also recommend carrying out a reconciliation between the income receipts issued and the income declared in the monthly and fiscal year provisional payments, in order to determine if there are tax receipts that must be canceled or if the declared income must be adjusted. Likewise, review those CFDIs that had been issued with the code “PUE” (Payment in a Single Exhibition) and whose payments had been in several subsequent months.

b) Payroll tax receipts

We recommend similarly reviewing the issuance of payroll tax receipts in order to verify that the keys assigned in the receipts to the concepts of income and deductions are in accordance with the catalog established by the tax authorities.

b) CFDI with Carriage Letter Complement

At FRALLA we help our clients in reviewing the criteria that must be considered either in the issuance of the CFDI with a shipping letter complement or in their receipt by their transportation and logistics service providers, among others.

VI. Other relevant topics

a) VAT Review – At FRALLA we help our clients in the review of the business reason, business cycle, origin of the flow for expenses and investments, destination and intersection with taxed, exempt and non-object activities, the effects on operations whose considerations have been compensated, among other related issues, as well as in the request for refund of this tax.

a) Controlling Beneficiary – We recommend that our readers check that reliable, complete and updated information on their controlling beneficiaries is obtained and kept as part of their accounting, in the form and terms that the tax authorities have indicated through general rules.

In this sense, at FRALLA our services include supporting the internal teams of the legal or accounting area to determine the information that must be kept as part of the accounting regarding the controlling beneficiaries of the entities, companies or trusts, as well as to review that the documentation and information you have has all the necessary requirements in case it is requested by the tax authorities.

* * * *

México City, México
September 2023