Judge Grants Suspension Due to Absence of Fiscal Regulations Amid COVID-19 Pandemic in Mexico
On April 3, 2020, the Third District Court of the State of San Luis Potosí, Mexico, granted a suspension in amparo Case Number 293/2020, in which Andres Manuel Lopez Obrador, President of the United Mexican States, is ordered to "issue the measures and actions to comply with Federal Tax Code Article 39, Section I, in the sense that he must issue, through general resolutions, a position on condoning or exempting, in whole or in part, the payment of contributions and their accessories, authorized deferred or installment payments, due to the country's current situation."
The referenced Article 39 establishes that the president "may" issue the previously stated measures "when there has been a detriment or an attempt to prevent the detriment of any place or region in the country, an industry, the production or sale of products, or the execution of an activity, as well as in catastrophe cases suffered by meteorological phenomena, plagues or epidemics."
The suspension is a measure permitted in amparo proceedings that, as its name implies, has the effect of ordering the authority to cease potentially violating acts or to force it to act in a certain manner, but this latter case only applies to very delimited circumstances. In the past, the majority of the suspensions granted for fiscal matters to order an "action" have been related to unfreezing bank accounts of taxpayers. Never before have these suspensions been used to obligate authorities to grant tax benefits, for example, in cases of natural disasters. This is perhaps because in past cases it was common practice by tax authorities to warrant benefits to affected zones. Thus, even though in practice the suspension minimally impacts the party requesting the amparo and the rest of the taxpayers, this precedent is itself relevant and novel.
In this case, the judge granted a "de plano" suspension (which means that it does not require a separate procedure to discuss its appropriateness)1 since he considered that the omission jeopardizes the employment and subsistence of employees of the entity filing the claim Cano Soto y Asociados S.A. de C.V.
Comments on the Suspension
The first matter to note regarding the suspension granted by the Third District Court of San Luis Potosí is that it does not imply that the company filing the claim is exempt from paying its taxes or that it has the benefit of deferred or installment payments; the only effect of this suspension, as indicated previously, is that the federal authorities issue "through general resolutions, a position on condoning or exempting, in whole or in part, the payment of contributions and their accessories…"since the decision from the judge does not state how said taxes should be exempted.
The second matter of interest is that the Article 39 refers to discretionary powers of the president, and for this reason, it is possible that a decision will be issued in the sense that the suspension is not appropriate since there is no obligation, and therefore it is not possible to legally mandate the president to issue the regulation, or to decide over their pertinence or implementation.
Third, it is important to note that the authorities may file a recourse2 (known as "recurso de queja") against this suspension. Therefore, it is not possible to affirm at this time that the suspension will continue until a final judgment is issued by the district judge.
Likewise, to quickly conclude this issue, the president could simply issue a decree with the measures that he considers appropriate, however minimal, or even, indicate that he does not consider the issuance of such measures necessary. In so doing, this statement would likely cancel out the subject matter of the suspension and amparo, which constitutes a termination cause of the proceedings.3
Finally, the General Health Council, an entity created at a constitutional level that depends directly on the president, may issue a resolution denying any type of stimulus, considering that it would be against the nation's interests, since the council has already decreed that tax collection is an essential activity in this pandemic.
Regardless, the judge's interpretation regarding the omissions that gave rise to the suspension reflects a gap that various companies have resented, and which should be carefully considered.
Holland & Knight attorneys have extensive experience in fiscal and litigation matters in a variety of industries. For more information, contact the authors or Holland & Knight's Mexico City office.
1 Article 126. Suspension shall be granted an ex officio and "de plano" in the case of acts that involve danger of loss of life, out-of-court attacks on personal liberty, communication loss, deportation or expulsion, proscription or exile, extradition, enforced disappearance of persons or any acts prohibited by article 22 of the Political Constitution of the United Mexican States, as well as the forced incorporation into the national Army, Navy or Air Force. In this case, the suspension will be decreed in the admission order of the complaint, communicating such complaint to the responsible authority without delay, through any means that allows its immediate compliance.
2 Law of Amparo, article 97(I)(b).
3 Article 63, section V, regarding article 61, section XXI, of the Law of Amparo.
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