Obligation to use Advance Electronic Signatures in 2004 Mexican Annual Tax Returns
For the last couple of years tax regulation have required that corporate taxpayers file all their provisional and annual returns electronically. However, a new twist has been added to the e-filing obligation for taxpayers who for tax year 2004 have a statutory obligation or assume voluntarily the obligation to file independent auditor certified tax returns ("Dictamen Fiscal"). As of their upcoming Dictamen Fiscal filing, whose deadline for e-filing is June 30, 2005, they must now used an Advanced Electronic Signature ("AES") which your company must have by May 31, 2005.
The Dictamen Fiscal must be filed by corporate taxpayers who in 2004 had: (i) taxable income in excess of approximately US$ 3’000,000; (ii) an asset base worth US$ 5’500,000; or (iii) withheld on a payroll of 300 employees or more.
To ensure compliance and proper AES handling, the Tax Law now provides that liability (including criminal) derived form its use and misuse will be attributed directly to the CEO or Board of Directors of the Company. A provision like this has no precedent in Mexican law and clearly evidences the government’s intention to aggressively move to e-filing and stringent compliance for the future, commencing this year.
Adopting AES for tax purposes requires, besides technology adjustments, developing security and legal policies. Additionally, AES are the launch pad for electronic invoicing, which is now viable in Mexico. Is your company ready? Below you will find a brief (ten questions) self-evaluation questionnaire, for you (or your IT Director) to determine whether your company is prepared to comply with this new obligation in Mexico.
We are, without doubt; the best positioned firm in Mexico regarding AES. From advising the Tax Authority itself in the implementation of its EPR, to helping in the drafting of the current e-contracting legislation; our specialists have been involved in the full array of legal services related to the Internet and overall tax compliance.
We will be glad to discuss with you, the results of the self-evaluation, and answer your questions as to how your company can benefit when implementing these mandatory requirements before the JUNE 30, 2005 deadline.
Self-Evaluation: ¿Are you ready for the FEA?
1. Does your company currently buy or sell by electronic means? (if you answer NO; please go directly to question 8)
2. Does your company verify the origin/identity of the purchaser or seller that performs electronic operations? (Validation Mechanisms)
3. If you answered YES to the previous question, How do you do it?
- Confirmation by telephone
- Confirmation by e-mail
- Asymmetric Encryption
4. Could your company demonstrate/know if the message (offer, purchase order, acceptance, etc.) has not been tampered? (Integrity)
5. Regarding the data messages that you send, are you certain that the information contained in them will not be modified?
6. Does your company keep records/archives of the transactions performed by electronic means?
7. Could your company assure/demonstrate that such archives will not be modified once filed?
8. Does your company have written policies regarding:
- Confidential Information
- Handling keys, passwords and system "privileges"
- Electronic Files
9. Are they complied with? How can you be sure?
10. Is there a specific person in charge of such security/validation mechanisms? (passwords, keys, PIN’s, etc) Is there a way to control such person’s activities?
If you (or your IT Director) answered "no" or "I don’t know" to questions 8, 9 and 10, your company is NOT yet ready to use the FEA WHICH IT MUST USE TO FILE THE INDEPENDENT AUDITOR CERTIFIED TAX RETURN BY JUNE 30TH, 2005.
If you answered "no" or "I don’t know" to questions 2, 4, 5, 6, 8, or 10; then your company is NOT yet ready for electronic invoicing. We suggest you to start working on it, why postpone the inevitable?
If you answered "YES" to all of the questions, it is advisable to deepen the analysis on questions 3, 7, 8 and 10. Probably your company is ready to start working on a DTR structure.
If the questions (or the answers) make you feel concerned, we can work together with you in order to assure that your transition to the Electronic Invoice world is as safe as possible for your company. For more information, we invite you to read our FAQS concerning the UGLY/FEA or visit our website, where you will find more information regarding this matter.
*The Advanced Electronic Signature for tax purposes is commonly known in Mexico by its acronym as the "FEA" (Firma Electrónica Avanzada); which, by a unwilling humorous twist of fate coincides with the Spanish female word for "UGLY".
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.