MEXICO Law and Practice Contributed by: Edgar Klee and Joel Gonzalez Lopez, Haynes and Boone, S.C.
9.3 International Tax International tax has garnered increasing attention in Mexico, especially with the implementation of BEPS recommendations. The actions taken by Mexico, such as amending various articles of the Tax Code and Income Tax Law to address issues like VAT for non- resident taxpayers, hybrid mechanisms, base ero - sion through financing operations, and aggressive tax planning, demonstrate a commitment to aligning with international standards. Additionally, the adoption of the Multilateral Instrument in 2022 further underscores Mexico’s commitment to enhancing tax transparency and preventing treaty abuse, which aligns with the broader goals of the BEPS initiative. Overall, the high public profile of international tax in Mexico is likely to drive continued efforts to implement BEPS recom - mendations effectively. 9.4 Competitive Tax Policy Objectives Balancing competitive tax policy objectives with the pressures of base erosion and profit shifting (BEPS) is a major challenge for any jurisdiction, including Mexico. As expressed throughout the responses here, Mexico, as a member of the OECD, is a major driver of BEPS action. The main challenge for Mexico is to remain competitive in the global market to attract investment and promote economic growth, which must go hand in hand with the implementation of BEPS measures, as such measures ensure tax equity/equality, protect the tax base and prevent tax evasion by multinational companies, which obviously has a positive impact on tax collection in Mexico. 9.5 The Competitive Tax System The IMMEX or maquila regime can be considered a key feature of the Mexican competitive tax system that might be more vulnerable than other areas of the Mexican Tax regime. 9.6 Hybrid Instruments and BEPS Implementation Several amendments were introduced through the Mexican tax reform of 2020 in line with the objectives of the BEPS Action Plan, particularly Action 2. These amendments introduced new anti-hybrid rules aimed at situations involving entities or legal arrangements that are treated as fiscally transparent under foreign tax regulations.
9.7 Interest Deductibility and Territorial Tax Regime Mexico applies a worldwide taxation system rather than a territorial one. Limitations on the deductibility of interest may discourage investment by increasing financing costs and potentially affecting the availabil - ity and structure of loans. 9.8 Controlled Foreign Corporation Reform Mexico applies a worldwide taxation system and has been applying CFC rules for more than 25 years. 9.9 Anti-Avoidance Rules The limitations on benefits and anti-avoidance rules outlined by the authorities, particularly regarding pre - sumptions of transactions lacking a business rationale and generating direct or indirect tax benefits, are likely to impact both inbound and outbound investors by adding an extra layer of compliance – ie, the need to have documents/information to prove that the eco - nomic benefit of a transaction exceeds its possible tax benefit. 9.10 Transfer Pricing and IP Taxation In Mexico, the transfer pricing changes recommended by BEPS have been adopted, including those pro - posed under Action 13 (ie, the local file, master file, and country-by-country report). These changes were challenged by taxpayers, but the Mexican Supreme Court ruled in favour of the Tax Authorities. 9.11 Country-by-Country Reporting and Transparency Provisions While provisions for transparency and country-by- country reporting are valuable in principle, the result - ing regulations should be streamlined to ensure they are non-invasive and do not represent a burden to taxpayers. 9.12 Digital Economy Businesses Since 2020, the Income Tax Law has incorporated a regime applicable to individuals with business activi - ties carried out through digital platforms, imposing withholding obligations on intermediaries, including non-residents, who must register before the Federal Taxpayer Registry (RFC) as withholding agents and issue the corresponding CFDI. That same year, a 16% VAT was introduced on digital services provided by
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