On November 18th 2015 new concepts were published on the federation official newspaper that seek to create a more efficient fiscal procedures in Mexico, among these reforms is article 76-A of the Mexican Income Tax Law (MITL), this article includes new informative filings regarding transactions with related parties.
These filings come as an implementation of action 13 of the OECD Base Erosion and Profit Shifting (BEPS) project, this action brings a reformulation of the transfer pricing reports that will allow the fiscal authorities better control and knowledge of the intercompany transactions of the taxpayers.
Article 76-A of the MITL adds 3 new informative filings, which can be summarized as follows:
· Local file.- Basically a transfer pricing report were the local subsidiary intercompany transactions are reveled as well as determination of compliance with the local transfer pricing regulations.
· Master file.- This document seeks the present a broader representation of the company’s global business, its policies regarding transfer pricing and its global income distribution. Giving a clearer idea of the transfer pricing risks to all fiscal authorities.
· Country by Country report.- This reports gathers the information regarding global income distribution, taxes paid and economic activities indicators for the multinational company in the specific countries where it operates.
The obligation to present this filings is for those taxpayers that fall under any of these parameters:
· Corporations that in the last fiscal year declared taxable income of more than $644,599,005.00 pesos or if it sells stock in the Mexican Stock Exchange.
· Corporations of the optional fiscal regime (chapter VI, Title II of the MITL)
· Parastatal entities
· Foreign residents with a permanent establishment in Mexico
Regarding the country by country report, this will be mandatory only to those taxpayers that are multinational controlling corporations, in other words, companies residing in Mexico that have foreign subsidiaries, that consolidate their financial information according to the IFRS and that have consolidated income of more than twelve thousand million pesos in the previous fiscal year.
With these filings the authorities seek to comply with one of the fundamental objectives of BEPS, regarding the avoidance of unilateral treatment of transfer pricing regulation and to seek that the return on investments are subject to tax in the jurisdictions where value is generated.
These new filings are geared towards big taxpayers that carry put intercompany transactions with foreign residents, nevertheless, it represents a shift on fiscal policy regarding transfer pricing, as due to this the Mexican tax authority is implementing transfer pricing capacitation programs in all of their fiscal compliance areas, which means more and wider audits regarding intercompany transactions.
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