CONSIDERATIONS FOR THE CLOSING OF THE 2020 FISCAL YEAR: PART TWO

12/1/2021

We continue with the list of important aspects that must be taken into account to adequately close the fiscal year 2020, as well as alternatives to reduce the tax burden that will avoid setbacks when calculating the income tax for the year and pay exactly what corresponds.

The first list is in our newsletter for the month of December and is also available for consultation at: https://www.manuelnevarez.com.mx

These and other strategies necessary for a successful tax closure and to prepare the annual corporate declaration without setbacks can be found in the book “INCOME TAX OF MORAL PERSONS: BASIC FUNDAMENTALS AND PRACTICAL APPLICATION”, in its updated edition for 2020, for which we include the references to it.

Accumulation of advances (Pages 9 and 10)
Estimated cost of sales deduction (Page 76)
Deduction of advance payments for expenses (Page 64)
Expenses that must be effectively paid at the close of the fiscal year and deductible expenses creating the liability (Pages 36 and 37)
Bad credit losses (Pages 62 and 63)
Deduction of exempt benefits paid to workers (Pages 58 to 61)
Deduction of Investments (Pages 39 to 46)
Deduction of donations (Pages 38 and 39)

Other strategies are:

Legal entities can deduct their obsolete or damaged inventories, since article 27 in its section XX provides for the deduction of goods that have lost their value, reducing the amount of inventory in the year in which this occurs, for which it is necessary that the damaged merchandise be destroyed, or that it be offered as a donation to authorized institutions in the case of basic goods for food, clothing, housing or health. For these purposes, the corresponding notices must be submitted to the SAT. (Book Tax on Corporate Income, page 77)
Interest charges derived from loans obtained by legal entities, as a general rule, can be deducted when they accrue, that is, when the obligation to pay them arises for the time that has elapsed, even when payment is not required. It is also important to consider the other requirements for your deduction such as the destination of the loans that generate the interest and the difference in the interest rates of the credits received and the credits granted to third parties.(Book Tax on Corporate Income, pages 12 and 52 to 54)
In the case of foreign exchange losses accrued due to the fluctuation of the foreign currency, they will have the same treatment as interest in accordance with the provisions of article 8 of the Income Tax Law, so they will be deductible as they accrue. (Book Tax on Corporate Income, pages 13 and 14)

Legal entities can also deduct payments for the insurance premiums that they have contracted, which correspond to concepts that the Law indicates as deductible or because there is an obligation to contract them according to other laws, provided that the requirements indicated are met. Article 27 in its section XII. It is important to remember that these payments can be deducted in the year in which they are made, regardless of whether the insurance coverage contracted covers more than one year. (Book Tax on Corporate Income, page 61)

Another insurance that constitutes an authorized deduction is the key man insurance, which tries to compensate the company for the decrease in productivity that could cause the death, accident or illness of technicians or managers. In addition, this insurance can generate an additional benefitif the risk covered by the policy does not occur and the amount of the insurance is recovered on the expiration date of the respective contract. (Book Tax on Corporate Income, pages 61 and 62)

In the event that permanent constructions, installations or improvements are carried out in premises leased or provided on loan, and that the contract stipulates that these constructions or improvements will be for the benefit of the owner, in the exercise of termination of the respective contract You can deduct the amount that is pending of said constructions or improvements based on the provisions of article 36, section VI of the Income Tax Law, and thus obtain a more significant tax deduction for these investments. (Book Tax on Corporate Income, page 45)

For their part, the construction companies have options, facilities and incentives provided for in the Law, to determine the ISR:
They accumulate their income on the date the work estimates are authorized for collection, as long as the payment occurs within three months after approval.
They can deduct estimated expenses.
Taxpayers whose income comes in 85% or more, from carrying out real estate developments, they have the option of deducting the acquisition cost of the land in the year in which they are acquired.

(Book Tax on the Income of Legal Persons, pages 169 to 178)

An essential element for the correct determination of the tax result is the application of tax losses that have been generated in previous years and that are pending amortization, which must be correctly determined, updated and applied in accordance with the tax provisions (Book Tax on the Income of Legal Persons pages 102 to 105)

Finally, another aspect that is just as important as ISR is the determination of PTU for the year. To determine the taxable base of the PTU, the non-deductible part of the payments that in turn are exempt income for the workers, as well as the normal deduction of investments that would correspond to them, must be subtracted from the accumulated income in addition to the authorized deductions. Assets to which Immediate Deduction was applied in fiscal years prior to 2014. (Book Tax on Income of Legal Persons pages 98 to 102)

To purchase the book in its printed version, call 455 91 00 ext. 131 or send your order to the mail:alejandra.jacquez@manuelnevarez.com.mx

Look for it also in its digital version at: https://www.pearsonenespanol.com/mexico/tienda-online/impuesto-sobre-la-renta-delas-personas-morales-fundamentos-nevarez-1ed-ebook