MEXICO: An Introduction to Tax: Controversy

Without a doubt, the major issue for litigation practice in Mexico – in any field – is the constitutional reform of the federal judge selection system, which originates from an initiative approved in September 2024 by the Federal Congress and the majority of state legislatures at a speed never before seen in Mexico’s recent history.

Although legislators focused their discourse on fighting corruption and improving access to justice for citizens, the approved reform is almost exclusively a change in the method of selecting judges at all levels of the federal judiciary. This is achieved by replacing the so-called “judicial career” with the popular election of judges. Except in very specific cases (such as tax issues, which according to the constitutional text must be resolved within six months, with rules clarifying how to calculate that period or to which matters it applies yet to be approved), procedural or substantive laws were not modified by the reform. As such, the only real change in the federal justice system in Mexico will be the people who carry out that work.

As a result of this reform, the first popular election of judges was held in June 2025 with the objective of replacing more than 800 federal positions. Turnout was very low, at approximately 12% of the electoral roll (not counting votes annulled by the citizens), whereas in presidential elections, average turnout is usually around 60%. This level of participation hardly justifies the cost and complexity of implementing the election, which also leaves many doubts as to its results.

In terms of tax controversies, the reform is of the utmost importance. In addition to the technical and practical complexities inherent in any matter where the counterparty is the government, various controversies in active litigation have been brought to public attention through daily presidential press conferences, where political and not necessarily technical positions are commonly taken by the President herself. This also puts pressure on the judges who are responsible for resolving the issues and will put pressure on the newly elected judges too.

Added to this are: changes in criteria or new criteria (in some cases, excessively formalistic) by the tax authorities which are difficult to anticipate, have immediate tax collection-raising purposes, and arise from the pressure that the government’s own public and social policies have on federal finances, since there has not been a substantial tax reform in Mexico for several years; the promotion of international arbitration against the Mexican government under treaties for the protection of foreign investment, derived from positions that break with tax criteria applied for decades; as well as previous public statements by some of the elected ministers of the Supreme Court of Justice of the Nation on tax matters that they will have to resolve when taking office.

All of this creates an unprecedented environment of uncertainty, in which the role of lawyers will be essential in helping to create an environment of legal certainty that will benefit economic stability and domestic and foreign investment, through technical approaches based on the law.

In our opinion, the tax practice in Mexico is entering a new phase, in which the following will be essential: assistance in dispute prevention, in the identification and adequate safeguarding of relevant information to build a robust defence, and the participation of lawyers during tax audits (before the controversy is even defined) and before the Taxpayer Defence Office (ombudsperson in tax matters) within the alternative dispute resolution procedure that is processed before that body. All of this must be done before the authorities determine a liquidated debt and there is a need to go to court.

Notably, this new scenario requires lawyers to sharpen our skills and sensitivity in seeking and building consensus with the tax authorities to reduce the need for litigation whenever possible. Undoubtedly, the new judges will not only have a learning curve where mistakes of all kinds will be made (which will have to be combated technically and assertively) but they will also be under great pressure from the Federal Government to resolve tax matters that they perceive to be substantial, which must also be addressed.

We also believe that it will be essential to know the profiles of the new judges, as well as to maintain an adequate technical and educational level in the claims, in order to provide solid elements for decision-making so that, in cases brought to trial, substantive criteria can be generated that contribute to the construction of legal certainty, for the benefit of all users of tax rules and regulations.

It is also important to mention that, in the academic debate, there is discussion about the possibility of applying the relatively new “General Law on Alternative Dispute Resolution Mechanisms” to tax matters and particularly to lawsuits that began prior to the constitutional reform described above. Beyond the technical aspects – since there are convincing arguments for the applicability of this law to tax disputes – political will is necessary. If it exists, it would be possible to resolve hundreds or thousands of lawsuits that began before the reform, with the possibility of generating almost immediate tax collection for the authorities.

Faced with a new stage and new challenges, the skills and creativity of experts in the field will be put to the test, and we must contribute more than ever to the genuine resolution of disputes with the tax authorities for the benefit of legal certainty and investment, which is essential for the country’s growth and the sustainability of public finances.