Article 9 of the General Law of Commercial Companies (LGSM) establishes that any company may increase or decrease its capital, observing, according to its nature, the requirements required by this Law.
In this sense, there are different kinds of capital reductions:
a) Decrease in value, reduction of nominal value, reduction of implicit value.
b) Cancellation of shares, release or non-payment of contributions, to absorb financial losses, reimbursement, amortization or payment of financial losses.
It is important to differentiate the concepts of reimbursement and reduction of capital , considering its tax effects, with the intention of taxing the partners or shareholders that withdraw profits that the company has produced and that have not paid taxes.
In this context, according to articles 9 and 135 of the LGSM , it is possible to consider that the reimbursement is one of the species of the capital reduction type , this is so because in the case of reimbursement, the cancellation or reduction of the nominal value or implicit of the action, originates a flow in favor of the partners or shareholders.
Therefore, a capital reduction does not necessarily produce a return to the shareholder , in such a way that it does not necessarily imply a reimbursement to the partner or shareholder.
For its part, the penultimate paragraph of Article 78 of the Income Tax Law (ISR) , it seems that does not recognize this distinction, by establishing that it will be applicable indistinctly, reimbursement, amortization or reduction of capital, regardless of whether there is or not cancellation of shares.
In this context, the ISR Law recognizes that there is a capital reduction provided that the partner or shareholder receives a return.
As indicated in sections I and II of article 78 of the Income Tax Law, the procedure can be applied only in cases where there is cash flow or a benefit passed on to the partner or shareholder as a result of the reduction.
Article 78 of the Income Tax Law states that the legal entities resident in Mexico that reduce their capital will determine the distributed income, according to the following:
I. The balance of the capital contribution account (CUCA) per share held on the date on which the reimbursement is paid will be reduced from the reimbursement per share.
The distributed profit will be the amount that results from multiplying the number of shares that are reimbursed or those that have been considered for the reduction of capital in question, as appropriate, for the amount that results in accordance with the previous paragraph.
The taxable distributed profit determined in accordance with the previous paragraph, may come from the net fiscal profit account up to the part of the balance of said account that corresponds to the number of shares that are reimbursed. The amount of the net fiscal utility account (CUFIN) that corresponds to the indicated actions will be reduced from the balance that said account has on the date in which the reimbursement was paid.
When the taxable distributed profit to which this fraction refers does not come from the net fiscal utility account, the legal persons must determine and pay the corresponding tax applying the rate established in article 9 of this Law to said profit . For these purposes, the amount of the distributed profit must include the income tax corresponding to it. To determine the tax that corresponds to said profit, the same will be multiplied by the factor of 1.4286 and the rate will be applied to the article 9 of this Law (30%).
The amount of the balance of the capital account of contribution per share determined for the calculation of the distributed profit, will be multiplied by the number of shares that are reimbursed or by those that have been considered for the capital reduction in question. The result obtained will be reduced from the balance that said account has to the date in which the refund was paid.
To determine the amount of the balance of the capital account of contribution per share , the balance of said account will be divided on the date on which the repayment is paid, without considering it, among the total of shares of the same person existing on the same date. , including those corresponding to the reinvestment or the capitalization of profits, or any other concept that integrates the accounting capital of the same.
II. The legal entities that reduce their capital , additionally, will consider such reduction as distributed profit up to the amount that results from subtracting the stockholders ‘equity according to the statement of financial position approved by the shareholders’ meeting for the purposes of said reduction, the balance of the account of contribution capital that is held on the date on which the aforementioned reduction is made when it is lower.
The amount obtained according to the previous paragraph will reduce the distributed profit determined in the terms of the second paragraph of section I of this article. The result will be the taxable distributed profit for the purposes of this fraction.
When the taxable distributed profit referred to in the previous paragraph does not come from the net fiscal profit account, the legal persons must determine and pay the corresponding tax to said profit , applying to it the rate foreseen in article 9 of this Law (30%) . For these purposes, the amount of the taxable distributed profit must include the income tax corresponding to it. To determine the tax that corresponds to said profit, the same will be multiplied by the factor of 1.4286 and the rate will be applied to the article 9 of this Law (30%).
When the taxable distributed income comes from the aforementioned net tax profit account, the provisions of the third paragraph of article 10 of this Law will be met, that is, it will not be obligated to pay the tax, and said profit must be reduced from the balance of the aforementioned account. The profit determined pursuant to this fraction will be considered for subsequent capital reductions as capital contribution under the terms of this article.
The stockholders’ equity must be updated in accordance with the Financial Information Standards, when the person uses these principles to integrate their accounting; otherwise, the stockholders’ equity must be updated in accordance with the rules of a general nature issued by the Tax Administration Service.
The legal entities referred to in this article must be paid together with the tax that, if applicable, has corresponded to the profit or dividend in the terms of fraction I of this article, the amount of the tax that they determine in the terms of fraction II thereof.
Finally, mention the following obligations in the capital reduction:
a) The issuing companies must provide the partners that request it, a certificate with the necessary information to determine the adjustments (Article 78 of the Income Tax Law), said record must contain the data recorded in the tax receipt issued for that purpose. .
b) The accounting and documentation corresponding to said information must be kept during the period established by article 30 of the Federal Tax Code, counted from the date on which said record is issued, which in this regard indicates that in the case of acts constituting the legal entities, of the minutes in which the reduction of the share capital is recorded, of the certificates issued or received by the legal entities under the terms of the Income Tax Law when distributing dividends or profits, of the necessary information to determine the adjustments referred to in articles 22 and 23 of the aforementioned law (adjustments to the average cost per share of the shares), as well as the declarations of provisional payments and the fiscal year, of the federal contributions, said documentation must be kept for all the time in which the company or contract in question persists.
c) Hold an Extraordinary Shareholders’ Meeting, where the capital reduction is approved.
d) Transcription of the aforementioned record in the Record of Minutes of the Shareholders’ Meeting.
e) Notarization of the Minutes of the Extraordinary Shareholders’ Meeting before a Notary Public, approving the capital reduction.
f) Registration in the Public Registry of Commerce of the registered office, of the notarial deed containing the protocolization of the minutes.
g) Registration in the accounting for the capital reduction, charging the capital stock account against a shareholders account (liability) and subsequently for the liquidation of the capital reduction, charging the shareholders’ account (liability) against the account of banks (active).
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