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Mexican tax reform 2014

Mexico

Mexico is committed to major tax reform in 2014. Taxand Mexico investigates the latest tax updates. 

Dividends

  • A new 10% withholding tax is imposed on dividend distributions by Mexican companies to Mexican resident individuals and foreign residents (individuals or corporations). 
  • This tax will be applicable only to dividend distributions that derive from profits generated from 2014 according to a specific procedure.
  • This withholding tax may be reduced through the application of an income tax treaty, for example:
    • 5% for intercompany dividends with a certain ownership
    • 0% in other cases (eg US or the Netherlands)

Sale of shares through the Mexican Stock Exchange

  • The sale of shares issued by Mexican and foreign companies when the transfer is carried out through the Mexican Stock Exchange will be taxed with a tax rate of 10% on the capital gain obtained
  • Payment through withholding by the financial intermediary
  • Gain is exempt if the seller resides in a treaty country

Limitations of authorised deductions
Interest, royalty or technical assistance payments made by a Mexican company to a foreign entity that controls or is controlled by the person making the payment will be non-deductible if such payments: 

  • Are made to certain entities that are transparent
  • Are made to entities which are considered non-existent abroad
  • Are not considered as taxable income abroad

Payments made by a Mexican company will be non-deductible if such payments are also deducted by a domestic or foreign related party, unless such related party considers income of the Mexican entity as taxable income in the same fiscal year or the next one. 

Access to tax treaties
Additional requirements are established for the application of income tax treaties regarding transactions between related parties the Mexican tax authorities may request to the foreign taxpayers a statement under oath supporting that there is juridical double taxation

Discover more: Mexican tax reform 2014


Your Taxand contact for further queries is:
Manuel Tamez
T. +52 55 5201 7403
E. mtamez@macf.com.mx

Luis Monroy
E. lmonroy@macf.com.mx

Taxand's Take

Multinationals with operations in Mexico should further investigate the new tax measures to ensure they remain compliant with the national laws. 

Taxand's Take Author

Manuel Tamez
Mexico

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