MEXICO Law and Practice Contributed by: Edgar Klee and Joel Gonzalez Lopez, Haynes and Boone, S.C.
9. BEPS 9.1 Adoption of BEPS Recommendations As a member of the OECD, Mexico has been actively involved in the design and development of BEPS and has been implementing many of the following recom - mended actions since 2014: • taxation of the digital economy (Action 1); • anti-hybrid rules (Action 2); • limiting base erosion involving interest deductions and other financial payments (Action 4); • preventing the artificial avoidance of permanent establishment status (Action 7); • a form of mandatory disclosure requirement for taxpayers (Form 76) (Action 12); • an obligation for taxpayers to present a country- by-country report, master file and local file (Action 13); and • new OECD transfer pricing guidelines (Actions 8–10). The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) entered into force in Mexico on 1 Janu - ary 2024. As of 2026, Mexico has notified its covered tax agreements under the MLI, and the convention’s provisions are now applicable to modify bilateral tax treaties without requiring separate renegotiations. As a result, the MLI introduced significant changes to Mexico’s tax treaty network, primarily aimed at pre - venting treaty abuse and aggressive tax planning. The PPT now serves as a general anti-abuse rule, deny - ing treaty benefits if one of the principal purposes of an arrangement or transaction is to obtain a tax advantage that contradicts the intention of the treaty. Additionally, the simplified LOB provision imposes specific eligibility criteria for claiming treaty benefits, further restricting access to reduced withholding tax rates and other treaty protections. These modifica - tions increase scrutiny on cross-border transactions, requiring multinational entities operating in Mexico to reassess their tax structures and ensure compliance with the new anti-abuse standards set out by the MLI.
9.2 Government Policy and Objectives Approach Mexico has shown a strong commitment to address - ing base erosion and profit shifting (BEPS) issues. The government aims to prevent multinational companies from shifting profits to low-tax jurisdictions and to ensure that they pay their fair share of taxes in Mexico. With respect to Pillar One, Mexico has participated in the Inclusive Framework discussions and endorsed the agreement in principle. However, Pillar One faces a de facto global standstill following the United States’ withdrawal from the multilateral agreement in January 2025. Since the Multilateral Convention (MLC) under - pinning Pillar One requires a critical mass of participat - ing jurisdictions, including the United States, to enter into force, implementation of Pillar One is not currently viable at a multilateral level. As a result, Mexico, like most jurisdictions, is not in a position to give domestic effect to Pillar One in the near term, and no legislative steps have been taken in this regard. With respect to Pillar Two, Mexico has endorsed the GloBE Model Rules and expressed its intention to implement the global minimum tax of 15%. Howev - er, as of early 2026, Mexico has not yet enacted the necessary domestic legislation to give effect to these rules. Implementation would require amendments to the Federal Tax Code and the Income Tax Law, and while such reforms have been anticipated, they have not yet been approved. The impact of implementing Pillar Two would be sig - nificant, particularly for multinational enterprises oper - ating in Mexico. It is estimated that approximately 100 organisations in Mexico would fall within the scope of Pillar Two. Implementation could result in increased tax revenues for the Mexican government, greater tax transparency, and a more level playing field for domestic companies. However, it would also bring additional compliance burdens for multinationals and may prompt changes in their tax planning strat - egies. Mexico’s existing tax treaty network, which often includes provisions to prevent double taxation or the application of reduced rates to certain types of income, would also need to be considered in the context of any future implementation.
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