MEXICO Trends and Developments Contributed by: Ángel Escalante, Gabriel Rojas, Uzziel Rodríguez and Daniel Colunga, Escalante & Asociados
legal structures. This has led to the recharacterisation of passive income as business income, particularly where the taxpayer is actively involved in generating such income; a broader interpretation of dependent agent permanent establishments, particularly where local agents play a key role in contract negotiation or conclusion; and increased scrutiny of digital and remote business models, where economic presence may exist without a traditional physical footprint. In practice, this is consistent with broader internation - al developments, including the OECD’s work on the digital economy and nexus rules, although Mexico has not fully implemented all aspects of these initiatives.
In practice, foreign investors must carefully assess: • their level of activity in Mexico; • the role of local personnel or intermediaries; and • the risk of being deemed to carry out business activities in Mexico, thereby triggering tax liability. Failure to properly assess these factors may result in the unexpected recognition of a taxable presence (PE) and the recharacterisation of income, with significant tax implications.
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