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“The Company has challenged SAT’s intimidation tactics through all Mexican domestic means available to it, including constitutional challenge before a District Court, and a complaint before Mexico’s Federal Taxpayer Defense Attorney’s Office, which proceedings have yet to be resolved and, due to the ongoing COVID‐19 crisis, the other remaining Mexican courts are currently unavailable for further hearings on these matters”
First Majestic Silver Corporation
FIRST MAJESTIC SILVER CORP. last week announced that the Mexican tax authority,
the Servicio de Administracion Tributaria (SAT), has by its various actions exhibited a total disregard for the applicable provisions of three separate double taxation treaties that it has entered into with Canada, Barbados and Luxembourg, which are relevant to First Majestic and its subsidiaries. SAT has repeatedly and unilaterally chosen to reject requests for dispute resolution procedures, known as mutual agreement procedures (MAPs), contained within those three treaties designed for addressing differences in interpretation and application of those treaties.
According to the Company’s advisors, such action is unprecedented not only for Mexico but internationally. In addition, notwithstanding Mexican law and the 2012 Advance Pricing Agreement negotiated and finalized between the SAT and Primero Empresa Minera, S.A. de C.V. (Primero), its
Mexican subsidiary, confirming Primero’s basis for paying taxes on the price Primero realized for silver sales between 2010 and 2014, the SAT unlawfully opted to ignore the legal existence of this Advance Pricing Agreement.
First Majestic Silver Corp. indicated that while it has made several attempts to seek to resolve its differences with the SAT using both local administrative and legal procedures and those contained within the treaties for avoidance of double taxation, and as well through diplomatic discussions, all such efforts have been met with actions of SAT intended to intimidate it, its subsidiaries and its employees, including notifications to Primero to secure amounts it claims are owed pursuant to its reassessments issued in violation of the terms of the Advance Pricing Agreement. These notifications impose restrictions on Primero’s ability to deal with its fixed assets until this matter is resolved.
The company has challenged SAT’s intimidation tactics through all Mexican domestic means available to it, including a constitutional challenge (called an amparo) before a District Court, and a complaint before Mexico’s Federal Taxpayer Defense Attorney’s Office (known as PRODECON), which proceedings have yet to be resolved and, due to the ongoing COVID‐19 crisis, the other remaining Mexican courts are currently unavailable for further hearings on these matters. The Company believes that, in addition to being contrary to various provisions of the Federal Constitution of the United Mexican States and Mexican domestic law, and Mexican court decisions, SAT’s actions contravene international law principles. In the Company’s view, these actions are neither fair nor equitable, are discriminatory against the Company as a foreign investor and amount to a denial of justice under international law.
First Majestic Silver Corp expressed its extreme disappointment that the unwarranted actions and threats of SAT, have continued at a time when the company is focussed on protecting and preserving the employment and livelihood in Mexico of thousands of employees during the COVID‐19 worldwide pandemic crisis. The company’s immediate concern during the COVID‐19 pandemic has been focussed on ensuring the health, safety and welfare of its employees and their families.
Under these circumstances, and in order to formally require the Government of Mexico to address the unlawful and unwarranted conduct of SAT for which it is responsible under international law, the company indicated that it has taken steps to serve the Government of Mexico with a Notice of Intent to Submit a Claim under the provisions of Chapter 11 of North American Free Trade Agreement (NAFTA). The service of this Notice by the company on the Government of Mexico will initiate a 90‐day process for the Government of Mexico to enter into good faith and amicable negotiations with the Company to resolve the current dispute between the company and the Government of Mexico.
First Majestic Silver Corp. indicated that it has deep roots in the social fabric of Mexico and values its relationships in Mexico with its various business partners and with various levels of government in Mexico. It has been recognized as a “Socially Responsible Company” by the Centro Mexicano para la Filantropria (CEMEFI) for twelve consecutive years starting in 2008 until the present. Furthermore, it has a track record of making substantial capital investments and social programs in Mexico and has plans to continue to make such further investments. The Company has invested in excess of $2.0
billion in Mexico since 2003 and has approximately 4,700 direct employees and supplies approximately 20,000 indirect jobs spread among eight states within Mexico.
The company has regretfully had to take this step of providing a Notice of Intent to Submit a Claim to Mexico so as to prevent further harm to the Company, its investments in Mexico, and to protect the health and welfare of its