TAX and AMPARO. Amparo Lawsuit against the elimination of partial cancellation or forgiveness of Tax Debts in Insolvency January 10, 2022

On November 12th, 2021, the Decree that amends several provisions, among others, the elimination of article 146-B of the Federal Tax Code (FTC) was published in the Official Gazette of the Federation (OGF), which established that the tax authorities could partially cancel or forgive the tax debts to taxpayers subject to an insolvency proceeding. Such modifications entered into force on January 1st, 2022.

Comments

Until December 31st, 2021, the article 146-B of the FTC stated that regarding of those taxpayers subject to an insolvency proceeding, the tax authorities may partially cancel or forgive the tax debts related to taxes that should have been paid before the date in which the referred proceeding initiated, provided that the taxpayer (i.e. trader) has entered into an agreement with his creditors under the terms of the Commercial Bankruptcy Law (CBL), and as long as:

  • The amount of the tax debts represents less than the 60% of the total of the recognized debts in the insolvency proceeding. In this case, the cancellation cannot exceed of the minimum benefit among those granted by the creditors that are not related parties and represent the 50% of the recognized amount to the non-tax creditors at the very least.
  • The amount of the tax debts represents more than the 60% of the total of the recognized debts in the insolvency proceeding. In this case, the cancellation determined in terms of the previous paragraph cannot exceed the amount that corresponds to the updates, interests and fines of the taxes owed.

Nonetheless, with the referred Decree such provision was repealed under the lax and questionable argument that it is consistent with article 28, first paragraph of the Federal Constitution, which was amended by means of the Decree published on March 6th, 2020, in the OGF, with the purpose of banning tax cancellations or tax forgiveness.                                                                

We consider that the repeal of article 146-B of the FTC is totally unreasonable regarding the elimination of the possibility to partially cancel or forgive tax debts, since the purpose for companies to initiate and undergo an insolvency proceeding is to preserve them and avoid that the general non-compliance of its payment obligations jeopardize its viability, as well as of those companies with whom they have a business relation, violating various human rights and fundamental principles to its detriment, and contravenes the public interest set forth in article 1º of the CBL.

Recommendations

Those companies that are subject to an insolvency proceeding or are about to undergo such proceeding, must refine, analyze, and promptly value their situation and, as the case may be, an amparo lawsuit may be filed against the repeal of the article 146-B of the FTC as deemed unconstitutional.

If you have any questions regarding the foregoing, please do not hesitate to contact us.

Mexico City, January 10, 2022