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Secondary laws of Energy Bill enacted

13 Aug 2014

The secondary laws of the Energy Bill submitted a few months ago to Congress were published in the Federal Official Gazette. Taxand Mexico takes a look at these new laws and which will be implemented immediately. 

Among these laws, the Revenue Law on Hydrocarbons was enacted to regulate the structures by means of which the Government will obtain income arising from the exploration and production (E&P) of hydrocarbons, either through concessions or contracts. 

Some of the main issues of the aforementioned law are described below:

  • Income from contracts- the Mexican Government will receive the considerations provided in each contract as well as the income tax that is due from E&P activities carried out by the contractors
  • Income from concessions- the Government will receive the federal duties paid on an annual basis and the income tax due by State productive companies from E&P activities
  • Public tenders and 'ring-fencing'- only State productive companies or Mexican resident entities for tax purposes whose corporate purpose is the exploration and extraction of hydrocarbons may participate in contract bidding processes
  • Depreciation rates for purposes of income tax- since the ITL does not provide the depreciation rates for assets used in Upstream Sector activities, different depreciation rates for investments made on such activities are provided
  • Permanent establishment- foreign residents carrying out upstream sector activities in national territory or in Mexico’s exclusive economic zone, in a period which combined adds more than 30 days in any 12-month period, will constitute a permanent establishment

Discover more: Mexican tax reform 2014

Your Taxand contact for further queries is:
Manuel Tamez
T. +52 55 5201 7403

Luis Monroy

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Also published in Thomson Reuters' Taxnet Pro, 7 August 2014

Taxand's Take

The Energy Bill along with its secondary laws will result in profitable opportunities to foreign investors in an industry that has been restricted and over-protected for far too long. Hopefully the enactment of the secondary laws will contribute to a very much needed boost of the Mexican economy. However it remains to be seen if this was the right move by the Mexican Government. There is more to come on this matter so we will keep the updates on any developments coming.

Taxand's Take Author

Manuel Tamez

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