MEXICO Law and Practice Contributed by: Ángel Escalante, Gabriel Rojas, Daniel Colunga and Brenda Favela, Escalante & Asociados
of income and establish limitations on domestic taxa - tion. Therefore, when applying a tax treaty in conjunction with domestic law, the following steps generally apply: • the taxpayer must demonstrate tax residence in one of the contracting states; • the taxable event must first be determined under domestic law; • the applicable treaty provision must then be identi - fied; and • if the treaty provides a maximum withholding tax rate lower than the domestic rate, the treaty rate may be applied directly by the withholding agent. Country-by-Country Reporting Multilateral Competent Authority Agreement On 27 January 2016, Mexico signed the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbCR). This agreement facilitates international tax transpar - ency and the exchange of information between tax authorities, and its implementation within domestic law is aligned with OECD BEPS Action 13, which con - cerns transfer pricing documentation and country-by- country reporting. 7.2 Exchange of Information Clauses in Tax Agreements Mexico participates in the Common Reporting Stand - ard (CRS) developed by the OECD for the automatic exchange of financial account information between tax administrations. Under the CRS framework, financial institutions annu - ally report information regarding financial accounts held by foreign tax residents, which is automatically exchanged with the tax authorities of participating jurisdictions. Mexico also exchanges information through the CbCR framework. In addition, domestic legislation and international agreements also allow for spontaneous exchange of information, where relevant information discovered
during a tax audit may affect taxation in another juris - diction, as well as the exchange of information upon request. These exchanges are conducted in accordance with international agreements such as tax treaties (in par - ticular Article 26) and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. In particular, exchange of information upon request (EOIR) operates through a formal procedure whereby the competent authority of a foreign jurisdiction sub - mits a specific and justified request to the competent Mexican authority, demonstrating that the requested information is foreseeably relevant for the administra- tion or enforcement of its domestic tax laws, in line with the standard set forth in Article 26 of the OECD Model Tax Convention. Upon receipt of such request, SAT is empowered to obtain the requested information by exercising its domestic audit and information-gathering powers, including those provided under Article 42 of the FFC, which allow the authority to request information from taxpayers, financial institutions and third parties. At the domestic level, the exchange of taxpayer infor - mation is further supported by Article 69 of the FFC, which, while establishing the general principle of tax secrecy, expressly permits the disclosure of such information when required under international agree - ments to which Mexico is a party. The entire process is subject to strict confidential - ity and use limitations, ensuring that the exchanged information is used exclusively for tax purposes and in accordance with the applicable treaty provisions. 7.3 Other Forms of International Tax Collaboration Although Mexico does not currently participate in the OECD’s International Compliance Assurance Pro - gramme (ICAP), it does participate in other forms of multilateral tax co-operation. In particular, tax authorities may conduct simultane - ous or joint tax audits with other jurisdictions in cases involving multinational enterprises or cross-border
307 CHAMBERS.COM
Powered by FlippingBook