MEXICO Law and Practice Contributed by: Jesús Aldrin Rojas, Miguel Ángel García Piña and Esteban Ollervides Toribio, QCG Transfer Pricing
QCG Transfer Pricing Campos Elíseos 223 Suite 402 Polanco Miguel Hidalgo Mexico City, 11550 Mexico Tel: +52 55 5395 1968 Email: jesus.aldrin@qcgtransferpricing.com Web: www.qcgtransferpricing.com
1. Rules Governing Transfer Pricing 1.1 Statutes and Regulations In Mexico, the transfer pricing regime is regulated through a comprehensive legal and administrative framework that includes statutes, regulations, norma - tive criteria and administrative rulings. The following is a summary of its principal sources and the rules applicable to related party transactions. Laws (Statutes) The Income Tax Law ( Ley del Impuesto sobre la Renta or LISR) constitutes the cornerstone of the Mexican transfer pricing regime. In particular, Articles 76, 76-A, 179 and 180 establish both formal and substantive obligations for taxpayers that carry out transactions with related parties, whether domestic or foreign. These provisions expressly incorporate the arm’s length principle and grant the tax authority the power to adjust income or deductions when agreed prices fall outside the range that would have been negoti - ated between independent parties under comparable circumstances. Article 76-A of the LISR also requires certain taxpay - ers to prepare transfer pricing documentation, includ - ing the local file, master file and country-by-country report, when the applicable thresholds are met. It fur - ther establishes penalties for failure to comply with these documentation obligations. The Federal Tax Code plays an important role in trans - fer pricing enforcement. Article 5-A introduces a gen -
eral anti-avoidance rule (GAAR) under which the tax authority may recharacterise transactions that lack a business purpose ( razón de negocios ) and generate a direct or indirect tax benefit. This provision is particu - larly relevant in the transfer pricing context, as it may be used to challenge intercompany restructurings or to deny deductions when the economic substance does not support the tax treatment adopted. Its appli - cation requires a prior favourable opinion from a col - legiate body composed of officials from the Ministry of Finance and the SAT. In addition, Article 42-B of the Federal Tax Code authorises the tax authority to determine the simula - tion of legal acts carried out exclusively for tax pur - poses, provided that the transactions involve related parties. To apply this provision, the authority must identify the simulated act and the act actually carried out, quantify the tax benefit obtained, and describe the elements supporting the existence of simulation, including the intent of the parties. This provision, introduced as part of the 2021 reform, operates as a targeted enforcement mechanism in transfer pricing audits. Regulations and Secondary Provisions The Regulations to the LISR complement the statutory framework, particularly with respect to the application of transfer pricing methods and the documentation requirements for intangibles, intragroup services and business restructurings.
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