Tax package 2020.

Mexico incorporates new BEPS rules.

On September 8th, the Mexican Ministry of Finance delivered to the Congress the decree initiative that modifies various tax provisions, most of them BEPS regulations, specifically: 1. Update of the concept of permanent establishment 2. Rules for combating hybrid instruments 3. Treatment of payments to foreign transparent entities and foreign legal figures, 4. Treatment of income of residents in Mexico or permanent establishments in national territory through transparent foreign entities and foreign legal figures. 5. Income subject to preferential tax regimes obtained by controlled foreign entities. 6. Limits on debt interest deduction (independent parties or related parties) based on the following formula: “adjusted” taxable profit * 30% = limit on the deduction of net interest. 7. Tax treatment for Income Tax and Value Added Tax of digital platforms. 8. New general anti-abuse rule (requiring a business reason over a tax benefit). 9. Alignment of the national rules of mutual agreement procedure and, finally, 10. Rules for the disclosure of aggressive tax planning “reportable schemes.”

The Mexican government continues the implementation of BEPS actions and strengthens the fight against practices that contribute to the erosion of the tax base. In subsequent deliveries, we will analyze the general context of application of these new BEPS standards in Mexico and their link to the transfer pricing regime.