Practical Mexican Tax Strategies

Download PDF of February 2013 Practical Mexican Tax Strategies
13 Mar 2013

IN THIS ISSUE

Back-to-Back Loans

Mexican courts have issued two decisions on back-to-back loans. The first decision recharacterizes interest under an international cash-pooling arrangement. The second decision recharacterizes interest in an intra-group reorganization. Page 1

Mexican Tax Reform

Strategies reviews Mexico's new tax reform for 2013. Page 1

Tax Information Exchange Agreements (TIEAs)

Administrative guidelines create new opportunities for Mexicans with offshore investments and reduce the burden to file informative returns. Page 3

Mexico’s Amnesty Program

Mexico’s amnesty program is very attractive for taxpayers who wish to revise previous tax positions, settle tax deficiencies currently in litigation or where precedents have favored the tax authority. Page 7

Employee Profit Sharing 

One issue that appears unclear under the recently adopted reforms to Mexico’s Federal Labor Law involves profit sharing payments to employees working for outsourcing companies that provide labor services to operating companies. Should PTU be calculated based on the net tax base of the outsourcing company providing the labor services, or on the net tax base of the operating company? Page 11

TABLE OF CONTENTS

IN THIS ISSUE

Mexico and U.S. Sign FATCA Agreement
The U.S. and Mexico announced a bilateral Agreement to implement the information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act (FATCA).
Page 1

Taxation of Software Payments
Taxation of payments for software continues to be a complex issue. Strategies discusses software payments in general and concludes that two specific types of payments—payments for the purchase of software products and payments for the right to distribute software products—cannot properly be characterized as royalties.
Page 1

FIBRAs and SIBRAs
Strategies reviews the Mexican non-binding criteria and its application for FIBRAs and SIBRAs.
Page 3

Mexico Tax Treaties
On January 1, 2013, Mexico will enter into new income tax treaties with Lithuania, Ukraine, and the Kingdom of Bahrain.
Page 5

Tax Amnesty Program
Guidelines for the Amnesty of tax assessments were published.
Page 15

TABLE OF CONTENTS

Economy:
Mexico's Changing of the Guard, p. 13

FATCA:
U.S. and Mexico Sign Bilateral FATCA Intergovernmental Agreement, p. 1

FIBRAs:
The Mexican Non-Binding Criteria and its Application for FIBRAs and SIBRAs, p. 3

Tax Treaties:
Mexico Enters into New Tax Treaties, p. 5

Tax Amnesty Program:
Mexico's Tax Amnesty Program, p. 14

Taxation of Software:
Taxation of Software Payments, p. 1

IN THIS ISSUE

Maquiladora Transfer Pricing

Strategies examines the interrelationship between the maquiladora transfer pricing provisions and the income tax and flat rate tax incentives granted to maquiladoras. Page 1

Real Estate Investment Trusts

There are two types of FIBRAS: those that issue certificates to the investing public through stock exchanges (public FIBRAS) and those that issue certificates solely to a reduced group of private investors (private FIBRAS).Strategies takes a look at the advantages and disadvantages of the public FIBRAS. Page 1

Franchise Agreements

Strategies considers how to minimize adverse tax effects of franchising agreements in Mexico. Page 3

Interest Recharacterized as Dividend Payments

The recharacterization of interest as dividend payments could adversely impact Mexican entities that make interest payments. Recent tax cases provide guidance. Page 5

TABLE OF CONTENTS

Transfer Pricing:

Maquiladora Transfer Pricing (and Related Issues)—Part III, p. 1

Real Estate:

Real Estate Investment Trusts in Mexico, p. 1

Franchise Agreements:

Tax Planning for Franchising Agreements in Mexico, p. 3

Interest:

Interest Recharacterized as Dividend Payments, p. 5

Tax Reform:

The Need for a New Tax Culture in Mexico; The Required Platform to Create and Enact an Exhaustive Tax Reform, p. 8

Tax Treaties:

Tax Treaties, p. 18