Mexico's Dictamen Fiscal Is Similar to New Fin 48 in the US

Excerpt from Practical Mexican Tax Strategies by Steve Axler & Dinorah Gonzalez (Halliburton)

One of the concerns resulting from the introduction of FIN 48 for many in-house tax practitioners, especially for US based multinational companies, is that the US Internal Revenue Service would now essentially have a road map to various tax positions taken by the taxpayer. However, the disclosure of tax positions to the tax authorities is not a new or unusual event in Mexico. In fact, for large taxpayers in Mexico this is an annual occurrence known in Spanish as the Dictamen Fiscal.

Often simply referred to just as “the Dictamen”, this is a tax audit of a Mexican legal entity or person that carries out business activities or any foreign residents with a permanent establishment in Mexico. The Dictamen Fiscal can only be performed by a registered and certified Mexican public accountant. Upon completion of the Dictamen, the accountant will issue a report which will be filed with the Mexican tax authorities (Servicio Administración Tributaria or “SAT”) stating whether, according to the applicable tax regulations and audit standards, the taxpayer has complied with its obligations. The public accountant is required to sign the Dictamen under penalty of perjury.

It cannot be emphasized enough the influence that a Mexican statutory auditor has regarding the tax positions taken by a taxpayer in Mexico.

More on Dictamen Fiscal

Managing Tax Risk in Latin America

In a recent discussion, PricewaterhouseCoopers' John Salerno joined the editors of Tax Strategies to talk with ADM's Robert Frable and Sony's Marc Lewis about their tax operations in Latin America, their new procedures for dealing with FIN 48, and transfer pricing procedures. This excerpt from that interview takes a look at their strategies surrounding FIN 48:

Strategies: What has your overall experience been in managing the implementation of FIN 48 in the region?

Lewis: It is hard to say that the Latin American region presents something that is unique within FIN 48 implementation versus some of the other regions but I think one thing to consider is how much reliance a taxpayer can place on the availability of Competent Authority or APA relief. To a certain extent, it is dependent upon how active the Competent Authority is between different countries and how active the APA programs are between different countries. Latin America, Mexico and probably some others have pretty robust activities. However, in other countries, it is just building up, so I do not think you are at the same level as you see in some of the countries in Europe, Japan and other places where you can rely upon a Competent Authority or APAs in the assessment of uncertain tax positions.

Frable: FIN 48 was an interesting experience with this being the implementation year. I think everybody was surprised at how much time they ended up spending on the implementation. It took away from your day-today responsibilities. I think it is going to get better; tax departments, controllers and even outside auditors had to work through a learning curve.

More >

FIN 48: What Kind of Documentation Do You Need and How Do You Protect It

FIN 48, recently issued by the FASB, sets forth standards for recognizing any position taken on an income tax return that impacts the amount of income tax reported on a taxpayer's financials. As firms move to comply with this rule, they will need to know what documentation is necessary and whether the documents will be protected.

The disclosures and calculations necessitated by FIN 48 require the taxpayer to engage in extensive analysis of its tax risk from current and past transactions in preparing its annual and interim financials. This analysis may take memoranda. Although tax opinions are not required by FIN 48, “[FASB] believes that a tax opinion can be external evidence” supporting a taxpayer’s tax-risk analysis. Depending on the materiality and/or complexity of a given tax position, a taxpayer ’s preparation of supporting documentation or its engagement of outside counsel for the preparation of legal opinions or memoranda may assist in meeting the MLTN threshold for recognition or in increasing the measurement of the benefit to be recognized.

More>

Tax Reform in Japan 2007

An interview with Al Zencak (Zeirishi-Hojin PricewaterhouseCoopers, Tokyo)


As reported in the previous issues of Practical Asian Tax Strategies, 2007 has brought significant tax reform for Japan. To get a better understanding of what this means for your multinational operations, we went to the experts at PricewaterhouseCoopers to discuss the major changes that were made and what opportunities and challenges these changes mean, along with some actions that your company should be taking to position itself to benefit from these recent changes.


View Excerpt from this Interview

Determining Uncertain Tax Positions under FIN 48 for Operations in Mexico and China

Companies are evaluating the impact of FIN 48, a US Financial Accounting Standards Board Interpretation, for their reporting of operations in emerging international markets such as Mexico and China.


FIN 48 prescribes a comprehensive model for the manner in which a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return.



More>