MEXICO Law and Practice Contributed by: Jesús Aldrin Rojas, Miguel Ángel García Piña and Esteban Ollervides Toribio, QCG Transfer Pricing
16. Transparency and Confidentiality 16.1 Publication of Information on APAs or Transfer Pricing Audit Outcomes There is no public information on APAs or transfer pricing audit outcomes. 16.2 Use of “Secret Comparables” The use of undisclosed comparables, often referred to as “secret comparables”, is governed by Article 69, fifth paragraph, of the Federal Tax Code. This provi - sion establishes that when the tax authority exercises its powers in relation to transfer pricing, as set out in Articles 76, Sections IX and XII, 90, 110, 179, and 180 of the LISR, information concerning the identity of independent third parties involved in compara - ble transactions, together with the comparable data used to support the authority’s determination, must be treated as confidential. Notwithstanding this confidentiality requirement, tax - payers may obtain access to such information through a designated authorised representative, in accordance with the procedure established in Article 46, Section IV of the Federal Tax Code. This procedure applies only in the context of on-site audits and requires the representative to execute a confidentiality undertak - ing. The subsequent revocation of the representative’s designation does not release either the representative or the taxpayer from their joint liability for any improper disclosure or personal use of the confidential informa - tion. In practice, the SAT’s use of secret comparables in transfer pricing audits has been a recurring source of controversy. Taxpayers face significant limita - tions when seeking to challenge assessments that are based on information they cannot fully access or independently verify.
15.3 Effects of Other Countries’ Legal Restrictions Mexico does not automatically recognise foreign legal restrictions as a justification for deviating from the arm’s length principle. The Income Tax Law does not contain an explicit provision regulating the gen - eral recognition of such restrictions. However, the tax authority and the courts may take foreign legal restrictions into account, provided that the taxpayer substantiates their existence and impact with objec - tive and sufficient evidence. In a relevant precedent, the Federal Court of Adminis - trative Justice (TFJA) established that complementary or alternative documentation may be accepted when a foreign legal restriction prevents the taxpayer from making adjustments or applying market conditions in Heading: Transfer pricing. The submission of comple - mentary or alternative documents is admissible when a foreign legal restriction exists. This precedent arose from a case involving a taxpayer that carried out transactions with related entities locat - ed in countries subject to sanctions imposed by the United States Office of Foreign Assets Control (OFAC). Because the sanctions prohibited accounting adjust - ments or financial transfers, the court regarded the supplementary evidence submitted by the taxpayer as valid for justifying the agreed terms. a transfer pricing context. Digital Record: 2015483 This approach is consistent with the OECD Transfer Pricing Guidelines, which allow local regulations to be considered in the comparability analysis when they have a substantial effect on market conditions.
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