Market overview

The proliferation of transfer pricing rules and regulations has significantly impacted Mexico, which was among the first jurisdictions to adopt the OECD's BEPS framework. Since then, the country has been making a conscious effort to close the gaps and mismatches in its tax regime. Over the past year, the Mexican tax authority (Servicio de Administratión Tributaria; SAT) has introduced several key reforms to the Mexican transfer pricing practices.

On May 15 2017, the SAT issued the first amendment to the 2017 Administrative Tax Regulations which detailed the requirements for master file, local file, and country-by-country reporting (CbCR). Laura Frías, counsel at Creel, García-Cuéllar, Aiza y Enríquez, said: "Although the domestic guidelines for filing the new transfer pricing documentation are similar to those published in the Action 13 final report, there are a number of differences that might be relevant for certain taxpayers, who will be required to provide more extensive reporting."

Furthermore, the SAT introduced new rules relating to the application of transfer pricing adjustments. Rule 3.9.1 of the Miscellaneous Rule for 2017 covers a spectrum of issues including the treatment of the transfer pricing adjustments, fiscal requirements that should comply with the transfer pricing adjustments and the treatment of transfer pricing. The new rules aim to provide greater certainty and clarity on additional taxable revenues and deductions by ensuring that these changes are reflected in the tax return.

Another significant development in the TP market is in relation to maquiladoras. In Mexico, maquiladoras tax exempt manufacturers contracted by foreign multinationals, now face increased tax liability if they fail to properly implement compliance measures under transfer pricing guidelines. In October 2016, the Mexican and US authorities agreed that US companies with maquiladora status in Mexico would not be subject to double taxation if they enter into APAs with SAT. As a result, it is estimated that around 700 maquiladoras have requested unilateral APAs in Mexico. While many believe that this agreement will provide greater tax certainty for multinationals, the measure underscores the complexity that companies operating in Mexico face.

Lastly, on June 7 2017, Mexico became a signatory to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), which is expected to further address double taxation issues between Mexico and other jurisdictions.

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)

Tax rates at a glance

(As of July 2017)

Corporate income tax 30%
Capital gains 30
Branch tax rates 10/30%
Withholding tax
Dividends 10%
Interest 4.9-35/40%
Interest paid to banks 10%
Paid to reinsurance companies 15%
Paid to machinery suppliers 21%
Paid to others 35%
Royalties from patents 35%
Branch remittance tax 10%
Technical assistance 25%
From railroad cars 5%

Source: PwC and Deloitte