MEXICO Law and Practice Contributed by: Ángel Escalante, Gabriel Rojas, Daniel Colunga and Brenda Favela, Escalante & Asociados
to low taxation may be treated as income derived from preferential tax regimes. Income is considered subject to a preferential tax regime when it is either not taxed abroad or taxed at an effective rate lower than 75% of the tax that would have been payable in Mexico. In such cases, the tax- resident taxpayer must recognise the income in the fiscal year in which it is generated, in proportion to its direct or indirect participation in the foreign entity, even if the income has not been distributed. Additionally, Article 178 of the MITL establishes spe - cific reporting obligations, including the submission of an annual informative return regarding income derived from preferential tax regimes. This regime is complemented by Article 28, section XXIII of the MITL, which denies the deductibility of cer - tain payments made to related parties or under struc - tured arrangements when the corresponding income is subject to a preferential tax regime. This rule oper - ates as a specific anti-hybrid and anti-base-erosion mechanism in international tax structures. Presumed Non-Existence of Transactions Another significant anti-avoidance mechanism is con - tained in Article 69-B of the FFC, which allows the tax authorities to presume the non-existence of trans - actions documented through tax invoices when the issuer lacks the assets, personnel, infrastructure or material capacity necessary to perform the activities or services described. Taxpayers identified under this procedure may be included in a public list of entities issuing simulated invoices, published by the SAT and in the Official Gazette, making this provision one of the most vis - ible tools used to combat invoice-based tax evasion schemes. Reportable Tax Schemes (Mandatory Disclosure Rules) Mexico also operates a mandatory disclosure regime for reportable tax schemes, established in Articles 197 to 202 of the FFC.
Article 197 identifies tax advisers who are required to disclose reportable arrangements, while Article 198 provides that in certain circumstances the disclosure obligation falls on the taxpayer itself. These provisions require the disclosure of tax arrange - ments that may generate a tax benefit in Mexico and that have certain characteristics associated with potential tax avoidance risks. 5.3 Blacklists and Non-Cooperative Jurisdictions Mexico does not maintain a formal blacklist of non- cooperative jurisdictions comparable to those adopt - ed by certain international organisations. Instead, it relies primarily on the preferential tax regime ( regímenes fiscales preferentes , or REFIPRES) frame - work, provided by Articles 176 to 178 of the MITL, which identifies income derived from low-tax jurisdic - tions and operates through a substance-based, case- by-case analysis of foreign income. Under such framework, income obtained through foreign entities or legal arrangements is considered subject to a preferential tax regime when it is: (i) not subject to taxation abroad; or (ii) subject to an income tax rate lower than 75% of the tax that would have been payable in Mexico on the same income. This determination is made on a case-by-case anal - ysis, requiring a comparison between: (i) the effec - tive tax burden in the foreign jurisdiction; and (ii) the Mexican income tax that would have been due under domestic rules. In such cases, a taxpayer must include the income in its taxable base in the year in which it is generated, proportional to its direct or indirect participation in the foreign entity receiving the income, regardless of whether the income has been distributed. For this purpose, the taxpayer must determine the taxable result of the foreign entity under domestic tax rules, to determine the taxable base and calculate the corresponding tax liability.
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