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Canadian miner First Majestic wants to resolve its tax dispute with the SAT with international arbitration

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MRT | 3 March 2021

Canadian miner First Majestic wants to resolve its tax dispute with the SAT with international arbitration

Canadian mining company First Majestic Silver Corp reported that on Tuesday it submitted a request for arbitration to the International Center for Settlement of Investment Disputes (ICSID). The company makes this request due to the tax debt and its differences with the Mexican government, according to a statement.

This request for arbitration was also made on behalf of Primero Empresa Minera (PEM), its subsidiary in Mexico. The company indicated that it is based on “Chapter 11 of the North American Free Trade Agreement (NAFTA).”

“Despite repeated attempts by the company to encourage the Mexican government to enter into negotiations in good faith to resolve the conflict, the government has not agreed to do so,” the mining company said in writing.

In addition, the Canadian mining company considers that the government’s actions are contrary to the terms of the Advance Pricing Agreement. In it, the methodology for determining PEM income and taxes for fiscal years 2010 to 2014 was established.

According to the company’s Mexican lawyer, that agreement is still valid based on the Federal Tax Code of Mexico; “Unless and until it is annulled by a court of last resort,” the company said.

However, the disputes between the mining company and the Tax Administration Service (SAT) do not end there. According to its report for the fourth quarter of 2020, the mining company should pay 219.2 million dollars for “the incremental income tax for the years 2010-2018.” That figure is before interest and penalties, without mitigating adjustments.

However, in that document First Majestic rejects a “tax liability” related to PEM’s tax dispute with the SAT.

In addition, the company noted that the local government has not wanted to participate in the mutual agreement procedures. These are under three international double tax treaties signed by Mexico.

So, First Majestic instructed its Washington DC international arbitration attorney, Arent Fox, to initiate the process under ICSID rules. Thus, it seeks to constitute a neutral and independent arbitration tribunal to adjudicate the dispute under Chapter 11 of NAFTA with the government of Mexico.

 source: MRT