First Majestic Announces Legal Action Against SAT

The Canadian Mining Company First Majestic reported it has started legal proceedings against the Mexican government after a prolonged tax dispute with the Tax Administration Office (SAT). In September 2020, First Majestic said in a press release that the Federal Court ordered the annulment of the Advance Price Agreement (APA), which had initially allowed First Majestic to pay taxes at a lower rate. To date, First Majestic owes SAT more than US$500 million due to unpaid taxes from 2010 to 2018, according to La Jornada.

First Majestic’s legal advisors reviewed the court’s decision regarding the APA annulment and came to the conclusion that the company had made a mistake in the APA request. The same advisors also concluded there were some irregularities in the procedures, as well as failures to address evidence from legal authorities, reported MBP. Despite this controversy, First Majestic stated it is aiming to cooperate and resolve the dispute in an amicable manner.

This issue continues to this day. President López Obrador said that First Majestic wished to take the issue to international courts. The president highlighted how other Canadian mining companies have always complied with their tax responsibilities and said he would like to see an arrangement between mining companies. The company has been a SAT target for some time now and the president has mentioned it during his daily conferences.

First Majestic has tried multiple times to engage in good faith negotiations with the Mexican government to resolve this dispute, but the latter has refused, according to a press release from the company. First Majestic believes that the government’s actions are contrary to the terms of Advance Price Management, which according to the company, remain valid in accordance with the Mexican Tax Code unless and until they are nullified by the court. First Majestic also mentioned how the Mexican government has refused to participate in Mutual Agreement Procedures under three double-taxation treaties signed by Mexico.

The company´s international arbitration council in Washington D.C. is set to initiate the legal process against the Mexican government under Chapter 11 of NAFTA, alleging that the federal government is not reciprocating the favorable treatment granted by First Majestic.