Understanding and facing a SAT cabinet review can be intimidating in your freelance career. In fact, it may cause concerns about how it could affect your operations and finances, right?

That's why understanding what a cabinet review entails, the phases involved, and its duration will help clarify your doubts and concerns. In this post, we bring you information and some frequently asked questions about the topic.

SAT Cabinet Review: What It Is, Duration of the Process, and FAQs

What is a SAT Cabinet Review?

A cabinet review is a process that verifies the authenticity and accuracy of the information presented in your tax declarations as a taxpayer in Mexico.

The Tax Administration Service (SAT) conducts cabinet reviews. It also handles issuing and validating documents, and even gives you the possibility to recover the SAT certificate.

In other words, the SAT uses cabinet reviews as an audit tool. This way, it can verify the tax compliance of taxpayers, whether they operate as individuals or legal entities.

During this process, documents from your independent business can be examined. For example, financial statements, accounting books, expense vouchers, among others. That's why it's important to get the CFDI (Digital Tax Receipt via Internet), as it protects the commercial operations you perform.

What are the Stages of the Cabinet Review?

The SAT cabinet review consists of at least four phases that you should know as a freelancer in Mexico:

1. Information Request. The SAT will ask for documents, accounting, and specific fiscal information, notifying you at your fiscal address. You will have a deadline to respond, and in case of non-compliance, penalties are imposed.

2. Report and Conclusion. After reviewing the provided data, the authority issues a document detailing the observations found. Then, you can present evidence to dispute these observations within 20 business days. If successful, the conclusion of the review will be communicated to you.

3. Determination of the Fiscal Credit. Conversely, if the observations persist and are not refuted, the entity issues a fiscal credit. If not clarified, they are considered admitted. Thus, the tax credit to be paid is fixed and notified to you within 6 months after the end of the process.

4. Fiscal Defense. If you are sure that the fiscal credit is not fair, you have the option to initiate tax defense processes. For example, filing an appeal with the relevant entity or taking the case to trial for annulment before the Federal Administrative Justice Court (TFJA).

This information is of great importance to every freelancer providing services in Mexico, whether as an individual or a legal entity. Even if you are thinking of expanding your business and entering the world of SMEs, for example.

Responsibilities of Authorities During Cabinet Reviews

In the process of the SAT cabinet review, fiscal authorities have several obligations, according to the Taxpayer's Rights Charter.

Responsibilities include:

• Present their identification at the beginning of the inspection.

• Deliver the Taxpayer's Rights Charter to the taxpayer.

• Follow the established procedures for the SAT cabinet review according to applicable provisions.

• Notify the taxpayer about the information request according to the law.

• Receive the documentation requested from the taxpayer at the designated place.

• Inform the taxpayer, if applicable, about the notice of observations.

• Establish the fiscal credit that the taxpayer must pay, if necessary.

• Apply penalties to the taxpayer, if applicable.

• Treat the audited taxpayer with respect.

• Avoid expressing unfounded presumptions.

What Are the Rights of Taxpayers During the SAT Cabinet Review?

Apart from taxpayers, jointly responsible parties and related third parties are also audited through this process.

In these cases, the Taxpayer's Rights Charter establishes the following rights:

• They have the right to have the fiscal authority properly identify itself.

• They must be informed about their rights and obligations by the entity at the beginning of the review.

• The authority has to deliver the Taxpayer's Rights Charter to them.

• They must receive the request for information with the legal requirements from the reviewing authority.

• The cabinet review must conclude according to applicable provisions.

• They have the right to arrange their fiscal situation, the ones that are subject to review.

• If the authority determines a fiscal credit, it must be notified.

• They have the option to pay the determined contributions or fiscal debts in installments.

• If there is disagreement with the acts of the authority during the review, they may opt for legal means of defense, such as an appeal for review or a nullity proceeding.

Duties of Taxpayers Subject to Fiscal Audits

Taxpayers, as well as jointly responsible parties or related third parties undergoing a SAT cabinet review, also have their obligations:

Firstly, they must provide the documentation to the fiscal reviewing authority at the designated place. This, as indicated in the notice requesting reports, accounting, among other required documents.

Additionally, they are obligated to pay the contributions or the amount indicated in the resolution. This can be through deposits at authorized banks, using the corresponding fiscal forms, depending on the deadline and the case, or via the internet.

If you open an account on DolarApp, you can pay in Mexican pesos, as it functions like a Mastercard.

Frequently Asked Questions About Cabinet Reviews

Cabinet reviews are a common procedure carried out by Mexican authorities. This is done with the purpose of verifying compliance with tax obligations by taxpayers.

To clarify common doubts about this topic, we have gathered some frequently asked questions:

Who are considered taxpayers?

Those individuals or entities, both physical and legal, that are legally obligated to pay taxes according to current fiscal laws.

Who can be subject to a SAT cabinet review?

Taxpayers, jointly responsible parties, and related third parties can be subjects of a cabinet review.

Who are included within the third parties related to taxpayers?

Physical or legal persons who, due to their activities or operations, have links with the taxpayers. This can include clients, suppliers, employees, among others.

What does being a jointly responsible party according to the Fiscal Code of the Federation imply?

Jointly responsible parties are physical or legal persons who share the responsibility to comply with the taxpayer's fiscal obligations jointly. For example, liquidators of companies, acquirers of businesses, tax withholdings, partners, or shareholders, among others.