In today’s article of Law In Cabo we will talk about tax evasion. Tax evasion is a concept that as an organization we always want to avoid. Although there are certainly individuals or companies that may fall into this practice, most tax evasion in Mexico is due to mistakes that could have been avoided in the Human Resources, Accounting and Tax departments. In 2021 it was reported that tax evasion in Mexico reached a total of 1.4 trillion pesos. This represents 6% of the country’s GDP.

We will review what tax evasion is, the types, the legal frameworks that review its regulation as well as what is considered as tax evasion. Join us.

Tax Evasion

What is Tax Evasion?

According to the Cuaderno de Investigación de la Dirección General de Análisis Legislativo, “Evasión Fiscal en México”, written by Juan Pablo Aguirre Quezada and María Cristina Sánchez Ramírez, tax evasion is a crime and is related to other crimes such as piracy, fraud and money laundering.

Formally, the definition of tax evasion is as follows:

“The non-payment of a contribution; not making payment of a contribution is equivalent to evading the duty to cover it. It is a violation of the law that establishes the obligation to pay to the Treasury what this body has the right to demand.”

Legal framework for tax evasion

In Mexico, there is a legal framework with laws and codes that establish the rules, typifications, definitions and fines for tax evasion:

  • Political Constitution of the United Mexican States
  • Fiscal Code of the Federation
  • Federal Criminal Code
  • Customs Law
  • Advanced Electronic Signature Law
  • Financial Administration Service Law
  • Value Added Tax Law
  • Income Tax Law
  • Federal Law for the Prevention and Identification of Operations with Resources of Illicit Origin.

Tax Evasion

Each of the aforementioned codes and laws have certain articles that refer to tax evasion, below we share them with you:

  • Political Constitution of the United Mexican States
  • Article 3
  • Fiscal Code of the Federation
  • Article 26
  • Article 71
  • Article 72 Article 75
  • Article 75 Article 108
  • Article 108 Article 109
  • Article 109 Article 109
  • Federal Criminal Code
  • Article 11 Bis

When is it tax evasion?

Tax evasion is when an individual or legal entity evades the payment of taxes. This can happen with different actions such as false invoicing, smuggling, etcetera. Article 95 of the Federal Tax Code defines tax crimes and contextualizes those who are considered responsible:

Tax Evasion

  • Consent to the commission of the crime.
  • They carry out the conduct or act described in the Law.
  • Jointly commit the crime.
  • Use another person as an instrument to carry it out.
  • Fraudulently induce another to commit it.
  • Fraudulently assist another person to commit the crime.
  • Help another after its execution, fulfilling a previous promise.
  • Have the quality of guarantor derived from a legal provision, a contract or the corporate bylaws, in crimes of omission with material result because they have the obligation to avoid the typical result.
  • Derived from a contract or agreement that implies the development of an independent activity, they propose, establish or carry out by themselves or through an intermediary, acts, operations or practices, from whose execution directly derives the commission of a tax crime.

The most common tax crimes in Mexico are

  • Smuggling
  • Tax fraud
  • Falsification of invoices
  • CTA Contacto ConsolidéFines for tax evasion
  • Individuals and legal entities must file their tax returns as well as reports before the IMSS, ISSSTE, INFONAVIT and STPS of the contracts as well as benefits, wages and salaries of their employees. 

Tax Evasion

Year after year, the SAT as well as other institutions in the country inform taxpayers about their declarations and reports. However, before the SAT it becomes an obligation to file the annual tax return (there are specific cases that do not, such as salaried individuals who have an income ceiling). In case of failure to do so, the individual or legal entity may be fined 30 thousand Mexican pesos. 

It is within the Federal Tax Code, in its article 109, where the obligation to file the annual tax return is communicated:

“Filing, for more than twelve months, the return of a fiscal year required by the tax laws, failing to pay the corresponding contribution, will be charged with the crime of tax fraud”:

On the other hand, according to Article 108 of the Federal Tax Code, the taxpayer who has evaded his tax obligations may be subject to imprisonment, from 3 months to 9 years. This is in accordance with the total amount that the authorities consider was evaded.

Tax Evasion

In summary, tax evasion is a crime in Mexico. It is defined as the non-payment of a contribution and therefore, evading the duty to cover it up. Although in many occasions individuals and companies fall into tax evasion due to carelessness, it is important to have a strategic ally to keep you informed and collaborate with you.

Are you in Baja California Sur, Mexico? Todos Santos, Los Cabos, La Paz, Loreto, San Jose Del Cabo, Los Cabos, El Pescadero? Are you in Nuevo Leon, Mexico? Apodaca, Cadereyta Jiménez, El Carmen, García, San Pedro Garza García, General Escobedo, Guadalupe, Juárez, Monterrey, Salinas Victoria, San Nicolás de los Garza, Santa Catarina and Santiago… 

At Cabo Lawyers we seek to satisfy the different legal needs of our clients, both in their business and personal matters. Contact us at: (+52)8119384461, where we will gladly advise you.

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