The Treasury proposal to implement the payment of the Income Tax for leasing in Mexico will have an impact on the price of income, experts warn.
The proposal to implement the payment of the Income Tax (ISR) for leasing in Mexico will have two important effects next year: a higher collection of taxes and the increase in rental costs, experts consulted by Expansión agreed.
In the Income Law Initiative (ILIF) for 2020, the federal government proposes that in real estate lease trials, the judge should not authorize overdue payments in case the owner has not issued the Digital Tax Certificates (CFDIs).
“In general terms, what is being incorporated is a new obligation in which when there is a civil or real estate lease trial and it is resolved that the lessee must pay the lessor the overdue income is made in proportion to the CFDI that these incomes are protected, ”said Ricardo Delgado, partner of Indirect Taxes at EY.
Óscar Ortiz, a leading partner of Taxes and Legal Services for Mexico and Colombia in EY, said that the federal government found a tax evasion in the leasing issues for which they proposed this measure.
“What originally comes as a protection to take out the lessee ends up being an inspection mechanism,” he said.
One of the objectives of the CFDIs is also to verify the formal relationship of a contract, says Arturo Rosales, director of finance at Homie, a firm dedicated to real estate leasing, although he considered that this formalization of the owners could result in an increase in the rent prices.
And one of the reasons why prices would increase is due to legal processes. And it is that when a tenant does not pay his monthly rent in Mexico City, double trials are made: one to recover the property and another to collect the income. In the State of Mexico, says Rosales, it is possible that the owners recover the property but not the amount of the arrears.
“In the end it is somewhat marginal because what matters most to the owner is to recover their property and rent it again if they wish. This initiative makes two areas come first, which may be complicated in a legal way and we would have to wait for the final details, ”he said.
When asked about the impact of this reform, Rosales said that it is fiscally viable, that the final cost can be paid by the tenants but this will increase the collection base.
According to OECD data in 2017, Mexico was the country with the worst tax collection performance, capturing only 16% as a proportion of GDP. The Government of AMLO has the difficult promise of having a primary surplus, that is to say that revenues are higher than expenses; besides not raising public debt.
The Congress of the Union must discuss and approve the 2020 budget proposal of the Executive Branch no later than October 31.
The Mazatlan Post