Mexican Legal Framework of Business Insolvency - White & Case

A reorganization plan would be enforced on public debt holders without the need to carry out
an exchange or similar registered offer.
34. Tax Issues
Some of the most relevant tax aspects in light of insolvency concern the treatment for
reserves for uncollectible claims, income recognition from haircuts and capital gains and
transfer taxes arising from the disposition of assets.
A creditor may obtain a deduction for losses arising from uncollectible claims if, among other
cases, the debtor has been declared en concurso [LISR 31-XVI-c].
Generally, a taxpayer would have to recognize a haircut as taxable income [LISR 167-I, 168-II];
however, in the case of a debtor declared en concurso, the gain would offset a tax-loss
carryforward, and the debtor would not have to accrue the difference resulting from the
gains exceeding the loss carryforward [LISR 16 bis, 121 bis].
There are no exemptions or special tax treatments on the sale of assets of a debtor declared
en concurso. Local transfer taxes could also apply to the sale of realty. There are, however,
some benefits concerning the recognition of interest income to asset management
companies that acquire loan portfolios and comply with certain regulatory requirements. 86
35. Criminal Aspects
The Insolvency Law provides for certain criminal activities and their sanctions in connection
with an insolvency procedure. The criminal actions generally imply bad faith on the part of
the debtor, including carrying out deliberate actions to cause or aggravate its cessation of
payments and the destruction, alteration or hiding of books and records [LCM 271-277].
86 See Rule I.13.6 of the Resolución Miscelánea Fiscal para 2011.
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