Mexico

Market overview

It has been an active year for the Mexican transfer pricing market, and the OECD BEPS project has been the favourite topic of most TP professionals for the past couple of years.

"Mexico has been very enthusiastic about the implementation of BEPS into our law, and the government has been very proactive in these matters," said Rodrigo Covarrubias, partner at Skatt. "Unfortunately… considering the broad scope of these aspects, from both an international and local perspective, and the possible legal and formal aspects, the way the provisions are worded and drafted has led to some controversy and some of them may not be fully regulated the way they should be," he added.

The tax authorities, in anticipation of new BEPS-inspired legislation, have been very active in their auditing of multinationals in the past few years. They are carefully checking that there is substance behind transfer pricing structures, and it is therefore important for taxpayers to have the documentation to back this up.

"As of two or three years ago, everything has been about BEPS, and what is happening now is that we are moving into assessments by the tax authorities," said Alejandro Barrera, partner at Basham, Ringe y Correa. "Transfer pricing auditing has grown dramatically and consistently during the last few years. This area will without a doubt be the one which will be assessing and collecting more taxes from taxpayers."

Mexico's existing transfer pricing rules generally comply with the OECD guidelines, and the Mexican government has strong ties with the OECD. Barrera said that Mexico had actively participated to enact some of the BEPS actions, and that for example when Mexico enacted a new income tax law in 2014, some of the most important changes were the incorporation of certain BEPS actions, such as country-by-country reporting (CbCR). In addition to CbCR, the tax reform also included master file and local file requirements. This means that Mexican companies must submit the required document by the end of 2016.


Tax authorities

Servicio de Administración Tributaria
Av. Hidalgo 77, col. Guerrero
cp 06300 Mexico, DF
Tel: +52 1 800 4636 728; (+1 877 4488 728 from US and Canada)
Website: www.sat.gob.mx


Tax rates at a glance

(As of April 2016)

Corporate income tax rate 30% (a)
Capital gains tax rate 30% (b)
Branch tax rate 30%
 
Withholding tax
Dividends 10% (c)
Interest paid on negotiable instruments 10% (d)(e)
Paid to banks 10% (d)(f)
Paid to reinsurance companies 15% (d)
Paid to machinery suppliers 21% (e)
Paid to others 35% (d)
Royalties from patents and trademarks 35% (d)
From know-how and technical assistance 25% (d)
From railroad cars 5% (d)
Branch remittance tax 10% (c)
 
Net operating losses (years)
Carryback 0
Carryforward 10

  1. A 10% tax is imposed for employee profit sharing.
  2. The capital tax rate for foreign residents may be 25% or 35%.
  3. This tax applies to dividends paid out of profits generated after 2013.
  4. This is a final tax applicable to non-residents. Payments to tax havens are generally subject to a 40% withholding tax.
  5. This rate can be reduced to 4.9% if certain requirements are met.
  6. A reduced rate of 4.9% is granted each year to banks resident in treaty countries.

Source: EY 2016 Worldwide Corporate Tax Guide