MEXICO Law and Practice Contributed by: Ángel Escalante, Gabriel Rojas, Daniel Colunga and Brenda Favela, Escalante & Asociados
Escalante & Asociados Torre Altiva/Blvd Manuel Avila Camacho 138 Piso 8 Lomas de Chapultepec Miguel Hidalgo 11000, Mexico City Mexico Tel: (+52) 55 8854 9587 Email: dmariscal@eyalegal.com Web: www.eyalegal.com
1. Sources and Principles 1.1 Domestic Sources of International Tax Law The Mexican tax legal system is primarily grounded in the Political Constitution of the United Mexican States (the “Federal Constitution”), particularly in Article 31, section IV, which establishes the obligation of indi - viduals to contribute to public expenditure in a pro - portional and equitable manner. These constitutional principles operate as substantive limits on the taxing power of the state and apply equally in the context of international taxation. In addition, Article 133 of the Federal Constitution establishes the hierarchy of legal norms within the Mexican legal system, providing that international treaties concluded by the executive and approved by the senate form part of the supreme law of the union. The principal legislative source governing internation - al taxation is the Mexican Income Tax Law (MITL), which regulates, among other things: • the taxation of non-residents on Mexican-source income; • the concept and taxation of permanent establish - ments (PEs); • transfer pricing rules applicable to related party transactions; and • preferential tax regimes. The Federal Fiscal Code (FFC) complements this framework by establishing general procedural provi - sions, including the audit powers of the tax authorities and interpretative rules applicable to tax legislation.
Administrative interpretation is primarily issued by the Mexican Tax Administration Service ( Servicio de Administración Tributaria or SAT), particularly through: (i) the annual Miscellaneous Tax Resolution and its annexes; and (ii) non-binding interpretative criteria. Judicial precedents issued by the federal judiciary as well as decisions of the Federal Administrative Justice Court constitute another important source of interna - tional tax rules in Mexico. Finally, Mexico maintains an extensive network of double taxation treaties (currently exceeding 60 agreements). These treaties aim not only to eliminate double taxation but also to prevent tax evasion and allocate taxing rights between contracting states. 1.2 Hierarchy of Sources From a theoretical perspective, Mexico is generally regarded as following a monist approach, since inter - national treaties become part of domestic legal order upon their approval by the senate and do not require further legislative transformation. This is expressly recognised in Article 133 of the Federal Constitu - tion, which establishes that treaties concluded by the executive and approved by the senate form part of the supreme law of the union. However, the hierarchy position of treaties within the national legal system has been clarified through Supreme Court of Justice jurisprudence which has established that: (i) international treaties on human rights have a constitutional hierarchy; and (ii) other international treaties, including tax treaties, are hier - archically below the Federal Constitution but above federal legislation.
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