Rejection of million-dollar VAT refund for failure to file certified translations
A pipe manufacturing company requested a refund of 4.9 million pesos for value-added tax.
The tax agency denied the refund because the company filed its invoices in English without an expert translation into Spanish.
Dissatisfied, the company took the case to the Supreme Court, arguing that the tax legislation does not clearly specify which documents require translation.
The Tax Code Regulations state that “accounting records” must be translated into Spanish. Therefore, the invoices, although they are part of the companies’ accounting, do not need to be translated into Spanish. Up to this point, the Supreme Court agreed with the company.
However, the Resolución Miscelánea Fiscal for 2018 (and as of today) states that when companies request a tax refund, they must show the invoices with their expert translation into Spanish.
In this context, since it was a tax refund, the Supreme Court ruled that the company must have filed the translated invoices. This in order to give certainty about the transactions reported by the company against the accounting records.
The decision, proposed by Justice Laynez Potisek, was approved unanimously by four votes in the Second Chamber and gave rise to binding precedent 2027558, of mandatory application throughout Mexico as of November 13, 2023.
Two additional reasons why the appellate court denied the amparo claim to the company:
First, because it would be contrary to the legal certainty principle to consider that the words in English are easy to understand or that a bilingual dictionary can be consulted, since each of the parties could attribute a different meaning without the certainty that it indeed corresponds to the case and context in which a certain expression is used.
Second, because the expert translation of the invoices is the taxpayers’ burden, and it is not responsibility of the tax agency to aske for them during the refund process.