In Mexico, the Tax Administration Service (SAT) The Tax Authority is a key institution within the country's tax system. Its main objective is to ensure that both individuals and corporations (companies) comply with their tax obligations, such as paying taxes, issuing electronic invoices and declaring their income. But how does this body really work and why is it so important? Here we explain it to you.

1. What is the SAT?

The SAT is a decentralized agency of the Ministry of Finance and Public Credit (SHCP), responsible for the administration, collection and inspection of federal taxes. In addition, it is responsible for regulating and supervising activities related to the tax compliance of taxpayers, both individuals and legal entities.

2. Which taxpayers are affected by the SAT?

The SAT regulates all Mexican citizens and companies that generate income, this includes both individuals and corporations. The main types of taxpayers that must interact with the SAT are:

• Natural persons: Those who have income as employees, self-employed workers, landlords or service providers.
• Legal entities: Companies, civil associations and other legal entities that carry out economic activities.

3. The main functions of the SAT

The SAT performs various functions to ensure that taxpayers comply with their tax obligations. Some of the most important are:

a) Tax collection

The SAT is responsible for collecting taxes at the federal level. This includes income tax (ISR), value added tax (VAT), and other taxes related to economic activities.

b) Supervision and audits

One of the main functions of the SAT is to ensure that taxpayers comply with their tax obligations. To do so, it carries out periodic audits and reviews, detecting possible irregularities in tax returns.

c) Facilitation of tax procedures and services

The SAT also offers various services to facilitate tax compliance, such as the issuance of the Electronic Invoice (CFDI), the Federal Taxpayers Registry (RFC), and the filing of tax returns online through its web portal.

4. How do taxpayers interact with the SAT?

Taxpayers must register their tax activities with the SAT, which is done through the Federal Taxpayer Registry (RFC). In addition, they must comply with various obligations, such as:

• Declare taxes
• Issuing electronic invoices: The SAT requires taxpayers to issue electronic invoices to record all commercial transactions. Invoices must meet certain tax requirements and be sent through a CFDI (Digital Tax Receipt over the Internet) system.
• Paying taxes: Taxpayers must pay taxes on their income according to the rates established by the SAT.

5. Benefits of complying with the SAT

Complying with tax obligations is not only a legal obligation, but also has several benefits:

• Access to tax credits: Complying with the SAT allows you to access benefits such as tax credits and financing, both at a personal and business level.
• Regularization of the tax situation: You will avoid legal and tax problems, such as audits or penalties for not making payments.
• Better image before financial institutions: Companies that comply with their tax obligations have a better reputation in the business world and with financial institutions.

7. Consequences of not complying with the SAT

Failure to comply with tax obligations may result in financial penalties, such as fines, surcharges, and even seizure of assets. In addition, the SAT may initiate legal proceedings to recover unpaid taxes.

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The SAT It is a key piece in the Mexican tax system and, although it may seem complex, with the right tools and guidance, complying with tax obligations becomes a more accessible process. If you have any questions about how to comply with your obligations, send us a message and we can help you.