The Supreme Court of Justice in Mexico has been compelled to intervene in the tax dispute between the gambling group Codere SA and SHCP, Mexico’s Ministry of Finance and Public Funds.
The dispute arises from the SHCP’s demand that Codere, a Spanish gambling group, should pay taxes and surcharges for the year 2008, which the Ministry estimates to be MEX 1.2bn pesos (approximately €300m).
Codere claims it was exempt from tax obligations in 2008 due to an ‘amparo’ granted by Mexico’s Federal Court of Administrative Justice (TFJA).
Following a ‘new determination’ by the Tax Administration Service (SAT), which increased Codere’s tax charge from MEX560m to 1.2bn pesos, the SHCP has reinitiated its tax dispute.
The Ministry contends that the initial protection is no longer applicable given Codere’s increased tax obligation, providing the basis to demand the operator settle its outstanding liabilities.
As the SHCP details, “Following the SAT’s reassessment, Codere’s subsequent nullity trial upheld the SAT’s resolution, and their direct protection appeal was denied.”
The SAT reinstated its inspection and determined a revised “tax credit of 1,272,385,927 pesos”. Dissatisfied, Codere pursued another annulment trial, which upheld the SAT’s resolution; subsequently, Codere appealed to the Supreme Court for direct protection against this outcome.
Codere has challenged the Supreme Court, questioning the constitutionality of specific sections of the Federal Law of Administrative Procedure to avoid paying the taxes demanded by the SHCP.
This appeal marks the first time Mexico’s Supreme Court will intervene in a legal dispute regarding gambling taxes.
In connection with the dispute, the Supreme Court held a preliminary judgment in which three ministers voted against the SHCP’s appeal, while two upheld the ministry’s right to its claim.
Codere possesses 135 permits to operate gaming arcades and bingo halls in Mexico, set to expire between 2027 and 2048.
2022 accounts saw Codere narrow its operating losses to €320m, following 2021 directives which saw the group consolidate its business by demerging its Codere Online unit and delisting from the Bolsa Madrid exchange.
The firm’s latest consolidated accounts for 2023 YTD trading saw Codere’s operating losses track at €233m (+120%). The increase in losses was attributed to “impairment charges for alleged non-compliance” of its gambling units in Mexico and Argentina.
LatAm media highlighted the significance of the Supreme Court’s intervention, noting that the case will not only influence Codere’s fortunes but also establish a precedent for how multinational companies are treated under Mexico’s Tax Law.