BUSINESS NEWS January 2007

Transcription

1 Martín Mendalde 1755 PB Col. Del Valle, México, D.F. tel. +52 (55) fax +52 (55) BUSINESS NEWS January 2007 Dear clients and friends, A new year finds Mexicans evidencing the first few days of a new regime. The beginning of President Calderon s government has seemed better than expected, especially after the political turmoil that existed during the last semester of What seemed would be an enormous conflict of national proportions has died down. We are hopeful and expecting the best. The last month has also resulted in a variety of legislative changes that merit consideration. The salient issues are discussed below. Finally, we avail ourselves of this opportunity to wish all of you the very best for Trade and Customs Yours truly, Vázquez Tercero y Asociados, S.C. Legal Matters 1.1 Amendments to Decision 2/2000 of the Advisory Council on Trade between Mexico and the EU. On December 14 th, the Ministry of Finance of Mexico published a second amendment to Decision 2/2000, which includes, inter alia, the insertion of Rule providing for the possibility that an importer may request from the Mexican Customs Administration the return of the relevant certificate of origin once the customs clearance procedures have concluded, but prior to any act of verification by the authorities, with the purpose of amending such certificate or causing the issuance of a new one. 1.2 Documents attached to an application for a Prior Sanitary Permit and/ for a Sanitary Notice. On December 20 th, the Ministry of Health published guidelines for the content of documents that are submitted in support of an application for a Prior Sanitary Permit and/ for a Sanitary Notice, thereby providing the minimum content requirements of a free sale certificate, as well as the documents that must be submitted in support of such procedures, with a definition of content, manner of submission and authorities in charge of such procedures. 1.3 G3 FTA On December 20 th, the Ministry of Economy published a Decision No. 45 of the Administration Commission of the FTA between Mexico, Colombia and Venezuela, which provides for an

2 extension until December 31, 2007 for the use of certain out-of-free trade zone goods for the manufacturing of textiles and garments that are subject to the customs preferences. 1.4 Antidumping Duties On December 15 th, 19 th, and 28 th, respectively, the Ministry of Economy published notices on: (i) the First Request for NAFTA Panel Review of the Final Determination of the antidumping investigation Red Delicious and Golden Delicious Table Apples and their mutations from the USA; (ii) the Resolution on the Revocation Proceedings submitted by several companies against the Final Determination of the antidumping investigation on plastic sharpeners, with or without a repository from China; and (iii) the Resolution on the Revocation Proceedings submitted by the National Chamber of the Oils, Greases, Soaps and Detergentes Industry (CANAJAD, by its acronym in Spanish) against the Final Determination of the sunset review of antidumping duties on liquid caustic soda from the USA, whereby extension of the AD duties is ordered for five more years as of July 13, On December 29 th, the Ministry of Economy published the final determination on the antidumping investigation on conventional tires for trucks (light trucks) from China, without the imposition of duties. 2. Amendments to the Foreign Trade Law On December 21 st, the Ministry of Economy published several amendments to Mexico s Foreign Trade Law (Ley de Comercio Exterior, or LCE ). These amendments are the result of a dispute submitted by the USA before the Dispute Settlement Body of the WTO in connection with the incompatibility between the amendments to the LCE published on March 13, 2003 and Mexico s obligations according to WTO rules. This dispute was resolved by a Panel Report and by the Appellate Body, and both entities substantially resolved that several articles of the LCE had to be amended in order to conform to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade (the Antidumping Agreement or ADA ) and the Agreement on Subsidies and Countervailing Measures (the ASCM ). The amended articles are the following: Article 53. Exporters and/or foreign manufacturers are granted a 23-day term, as of the date of receipt of the relevant form (which shall be deemed received 5 days after having been sent), for providing responses to official questionnaires. Article 64. (Found to be inconsistent with Article 6, paragraph 8, and paragraphs 1, 3, 5 and 7 of Annex II of the ADA, as well as Article 12, paragraph 7 of the ASCM). The obligation of the investigative authority to apply the highest individual dumping margin is eliminated when such authority acts based on the best information available. Article 65A. (Added). Definitive antidumping duties may be applied retroactively, but only for the three months prior to the application of temporary measures, when the investigative authority finds the existence of injury to national producers due to price discrimination or subsidies. Article 68. (Found to be inconsistent with Article 5, paragraph 8, Article 9, paragraph 3, and Article 11, paragraph 2 of the ADA, as well as Article 11, paragraph 9, and Article 21, paragraph 2 of the ASCM). Administrative reviews are eliminated for exporters who had dumping margins equal to or below de minimis. Likewise, reference to the volume of export sales is eliminated for the purpose of reviews to antidumping duties. Article 89D. (Found to be inconsistent with Article 9, paragraph 5, of the ADA, as well as Article 19, paragraph 3, of the ASCM). Applicants are no longer required to demonstrate that export volume is representative in the case of new exporter proceedings. Article 93. The investigative authority may no longer impose penalties on the importation of goods that is conducted within five months after the start of an AD investigation, which may be deemed to impair the repairing nature of antidumping duties. 2

3 Article 97 (in connection with Article 68). (Found to contravene Article 9, paragraph 3.2 and Article 11, paragraph 2 of the ADA, as well as Article 21, paragraph 2, of the ASCM). Applicants are no longer impaired from requesting a sunset or any other review as and when applicable due to the fact that the AD measure is the subject of judicial proceedings or otherwise. 3. Tax Issues During the month of December 2006, the Ministry of Finance published several resolutions and amendments to tax laws that we deem relevant to our clients and friends. The salient matters are the following: On December 4 th, the Ministry published amendments to the Regulations to the Income Tax Law, including the fact that for the purposes of article 69-E of such Regulations, in connection with Rule of the Miscellaneous Tax Rules for 2006, taxpayers may deem the balance existing as at December 31, 2005 as the initial record of goods and services payable. On December 4 th, the Ministry also published new Regulations to the Value Added Tax Law and to the Law on the Special Tax on Production and Services, thereby abrogating the previous Regulations published in the Federal Official Gazette on February 29, Finally, on December 27 th, the Ministry of Economy published the widely heralded Fiscal Package sent by President Calderon, with minor changes made by Congress. The most important matters are the following: Income Tax Applicable Rate: During fiscal year 2007 the corporate rate shall be 28% Purchases at restaurants: Only 12.5% of such purchases shall be deductible, except for travel expenses, which shall be deductible at a rate of 100%, provided other legal requirements are met. Investment in automobiles: The maximum amount that is deductible is $175,000 (without VAT), while during 2006 the maximum rate was $300,000. Depreciation of any excess amount shall not be deductible, and expenses incurred in connection with the purchased vehicle shall be deductible solely to the extent of the proportion they represent of the new amount regarding total investment. Sale of companies with losses: In order to impair taxpayers from eliminating or decreasing their tax burdens through the purchase of losing companies, a new provision is added which orders that in the case of change of control, only the losses sustained by such company shall be deductible against the profits resulting from the same business activity for which the losses occurred. Cap on obligation to file annual return: When an individual receives the payment of salaries or wages, he or she shall be obligated to file an annual return only if he or she receives $400,000 per year or more; or when the individual receives such amount derived from salaries and interest, the same cap applies, provided interest received does not exceed $100,000. This provision is applicable, also, to the 2006 annual return. Exemption for the sale of real estate: If a taxpayer inhabited a dwelling during at least the last five years, the earnings received from the sale of such dwelling shall continue to be tax exempted; if the real estate was inhabited for a lesser period, such earnings shall be exempted to the extent consideration paid does not exceed 1.5 million UDIS (investment units) (currently equivalent to 5.7 million Pesos). Tax shall be paid on the excess amount. Real Estate Trusts: The applicable tax regime for the debentures issued by these trusts (FIBRAS) is adjusted to simplify requirements imposed on the trusts and holders of the debentures. 3

4 Tax Stimulus for Cinematography: Although individuals or entities that invest in the Mexican movie industry have enjoyed a tax break since fiscal year 2005 (amended for fiscal year 2006), the Ministry of Finance has set out new rules for the granting of such tax break. The new break shall be equivalent to the amount invested in Mexican film projects, and may not exceed 10% of the Income Tax that is payable by the relevant taxpayer during the current fiscal year. When investors cannot adequately calculate this amount, they shall use the amount of Income Tax paid during the fiscal year immediately prior to benefiting from the tax break. Such tax break may be applied against Income Tax that is payable by the relevant taxpayer during the fiscal year immediately prior to benefiting from the tax break. Such break may be applied against Income Tax and/or the Tax on Assets that are payable during fiscal year 2007, but any amount remaining from such break may be applied against those taxes during the next ten fiscal years, until exhausted. The maximum tax break per taxpayer, per investment, shall be 20 million pesos. These provisions shall apply for investments made during 2006 which are approved by the relevant committee. Tax on Assets As of fiscal year 2007, debt may no longer be deducted from the value of assets for the purpose of determining the basis for payment of this tax. As a result of this huge increase, the tax rate is reduced from 1.8% to 1.25% Federal Tax Code Advisory Opinions: As of 2007, responses to requests for advisory opinions shall be non-binding for both the authorities and the applicant. Accordingly, they may no longer be contested. Verification authority: Based on several resolutions issued by Mexico s Supreme Court, the tax authorities may now determine the existence of new tax contingencies for periods and taxes that have been the subject of verification, only when facts other than those reviewed arise. On the other hand, when a specific period is the subject of verification, and during such period the taxpayer amortizes tax losses from previous periods, the authorities may request the documents that serve as a basis such amortization, and such request shall not be deemed a new act of verification. Federal Income Law for 2007 Taxpayers audited for fiscal purposes: During 2007, taxpayers will be entitled to reduce their fiscal result (taxable profits, in the case of individuals) by 0.5% for the purpose of Income Tax calculation, provided the monthly returns have been submitted in a full and timely manner, for the correct amount. Should the amount not be correct, but the variation does not exceed 5% for each monthly return payment, the applicable amount shall be 0.25% of such fiscal result. Remittance of tax contingencies: A new tax remittance program is implemented, whereby up to 80% of the taxes and antidumping duties owed and payable prior to January 1, 2003 but not paid, as well as 100% of penalties and surcharges thereon shall be pardoned. This benefit includes those tax contingencies that are subject to payment in installments as regards those amounts not yet paid. 4

5 Economic Matters 1. Mexico Inflation in Mexico returned since the month of October to its tendency to stabilize close to 4.0% per annum. Accordingly, the monetary policy of Banco de México has remained unchanged, thereby maintaining interest rates at close to 7.0% per annum. The decrease of oil prices and the deceleration of the U.S. economy have begun to negatively impact Mexico s trade balance. During November, we experienced our largest trade deficit (1,517 million Dollars) for a month of November in many years, and the largest for However, our trade deficit still maintains a reasonable level. Public financing have recorded until November 2006 a historic surplus, as a result of income derived from oil sales and better tax collection. Formal employment so far for 2006 has demonstrated its best performance since the year 2000, with an increase of million new workers. Unlike most years in the past, the Fiscal Package for 2007 sent by the President was approved on time and without any major changes by all of the country s political parties (a first in our history). However, the Mexican Government estimates economic growth of only 3.6% for 2007, and similar growth for each of the following five years. 2. The U.S. and the World The economy of the United States continues to act sluggishly, although inflationary pressures are becoming less due an decrease in oil prices. The FED has maintained unchanged its principal interest rate at 5.25% since June Consumer confidence has risen as a result of the increase in oil prices. The main concern, however, is the weakness demonstrated by the real estate market. Political Matters As expected, on December 1, 2006, Felipe Calderón took office as President of Mexico. He did so covered by a cloud of political uncertainty, from which he emerged relatively well; even triumphant, according to some. December 1 st past also meant the end of the Fox regime. This end signals change, mostly for the better: It seems that unlike his predecessor, Felipe Calderón has statesman qualities. His Fiscal Package (Income Resolution and Federal Budget, as well as several amendments to tax laws) was approved by Congress almost unanimously, with the favorable vote of all political parties, as a result of Mr. Calderón s lack of frivolousness (he did not intend great changes, just those amply accepted). He has exercised discretion in the appointment of his cabinet, thereby leading most Mexicans to at least, give him the benefit of the doubt. And, finally, President Calderón has exercised the firm hand expected by all Mexicans in fighting crime, especially organized crime. On the other hand, it seems that the social movement spearheaded by Andrés Manuel López Obrador against Felipe Calderón has lost steam and faltered. Even those politicians who supported 5

6 him seem to have decided to get to work and leave the election (and Mr. López Obrador) behind. If this is the case, we salute them. Of course, no other comment or judgment is either wise or merited at this time. Time, and time alone, will allow us to decide whether we chose right when we chose Felipe Calderón. So far, it seems like he has given steps in the right direction. We trust those steps become strides for a better Mexico. The Business News of Vázquez Tercero y Asociados is a free monthly publication for our clients and friends. It is not intended to provide specific legal or economic advice, which shall be obtained according to the particular case and the client s particular needs. Reproduction or dissemination of this document for commercial purposes is strictly prohibited. Please contact Adrián Vázquez (Adrian@vazqueztercero.com), Veronica Vázquez (veronica@vazqueztercero.com) or Horacio A. López-Portillo (horacio@vazqueztercero.com) should you have any comments or questions regarding this newsletter. If you wish to be eliminated from this mailing list, kindly send us an with the subject Please eliminate from Business News, and we will gladly delete your address. 6