A Mexican company operating in the pipeline manufacturing sector recently sought a 4.9 million tax refund from the Mexican tax agency.
The company had made numerous payments for products and services to foreign entities. Consequently, it submitted to the tax agency several invoices in English as evidence of its expenditures.
Regrettably for the company, the tax agency rejected the refund application citing the absence of translations of the invoices into Spanish.
Subsequently, the company pursued judicial review, escalating the matter through the Federal Tax Court, a court of appeals, and ultimately to the Supreme Court. The central argument presented by the company was the lack of clarity in the law regarding the translation requirement for documents pertinent to tax refund claims.
While the Mexican Tax Code Regulations provide that taxpayers must maintain all “accounting records” in Spanish or duly translated, invoices are not classified as accounting records, thereby allegedly exempted from the translation mandate. Initially, the Supreme Court sided with the company on this interpretation.
Refund Applications must include expert translations.
However, the Tax Miscellaneous Regulations specify that in the case of tax refund applications, foreign invoices must be provided with expert translations into Spanish. Consequently, the Supreme Court ultimately ruled against the company, affirming the previous rulings rejecting the tax refund request.
This judicial opinion, submitted by Justice Laynez Potisek, was unanimously endorsed and established the binding precedent numbered 2027558, effective nationwide as of November 2023.
Why do you need expert translations for tax refunds?
Moreover, it is important to note two additional rationales behind the medium-level court of appeals’ denial of the company’s refund request:
Firstly, it was deemed a violation of the constitutional principle of legal certainty to assume that English is readily comprehensible to Mexican agencies or that they could simply consult a bilingual dictionary, as interpretations of specific terms could vary among parties, potentially disregarding contextual nuances in individual cases.
Secondly, it was affirmed that the responsibility lies with the taxpayer to furnish translated invoices along with the tax refund application, rather than it being the duty of the tax agency to solicit them during the refund process.
In my firm we stand ready to provide our expertise as certified translators recognized by the Federal Judiciary Council and the American Translators Association. With extensive experience in translations for tax refund purposes, particularly for manufacturing and mining companies, you can rely on us for comprehensive support.
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