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Proposed 2016 Mexican tax changes approved by legislature’s lower house

Proposed 2016 Mexican tax changes approved by legislature’s lower house

The Mexican Congress’ upper house has yet to vote on Enrique Peña Nieto’s proposed 2016 Mexican tax changes.

At the end of the month of October of the present year, the lower house of the country’s congress approved proposed 2016 Mexican tax changes. The changes to fiscal rules that are being sought were proposed by Mexican president, Enrique Pena Nieto, on September 29th. Although this blog post does not present a complete and comprehensive overview of the entirety of the proposed 2016 Mexican tax changes, among the measures that are still to be considered by Mexico’s upper house are:

  • a provision that will result in the implementation of new transfer pricing documentation;

This item is included in the proposed 2016 Mexican tax changes at the behest of the G20, of which Mexico is a member. The documentation has been designed to impede the erosion of national tax bases, as well as for the purpose of impeding profit shifting by multinational corporations. Multinational corporations will be required to use the new documentation in their tax reporting should they report taxable income above $645 Mexican Pesos and:

  1. are publicly traded companies:
  2. are state-owned;
  3. are nonresidents that have established a “permanent presence” in Mexico;
    are under the “optional regime” for corporate groups
  • a provision related to capital repatriation;

Should the proposed 2016 Mexican tax changes approved by legislature’s upper house, amended provisions governing the repatriation of capital will be implemented between January and June of 2016.  According to the international tax and business consulting firm, Baker & McKenzie, “individuals and entities, and nonresidents with a permanent establishment in Mexico, may elect to pay only the corresponding income tax plus respective revaluations, with respect to income derived from direct and indirect investments held abroad through December 31, 2014, including income from preferential tax regimes.”

If this amendment in the proposed 2016 Mexican tax changes comes into effect, economic benefits to companies may include the abatement of “100% of surcharges and fines and the possibility of crediting foreign income tax pursuant to Article 5 of the Income Tax Law.”

  • an immediate deduction for the purchase of fixed assets.

This provision of the proposed 2016 Mexican tax changes will allow for the deduction for tax purposes of fixed assets in the year of their acquisition. The measure is being taken under “Article 3 of the Temporarily Effective Provisions of the Income Tax Law” as an incentive to investment in the purchase of productive capital goods and other fixed assets.

Although the above are just a few considerations contained in the documents submitted to the country’s congress, a detailed overview and analysis of the proposed 2016 Mexican tax changes can be examined in a recent Client Alert published by Baker & McKenzie.

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