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Mexican Tax Reform

29th Nov 2019

In October 2019, the Mexican Congress approved the proposed tax reform. The changes don’t increase existing rates of federal taxes but they do broaden the scope of activities that will be subject to tax. They also increase the reporting obligations of Mexican and foreign taxpayers. The new tax law will be effective from 1 January 2020 with reporting obligations from 2021.

What are the changes?

In general, the 2020 Mexican Tax Reform is meant to incorporate fundamentals of the OECD Base Erosion and Profit Shifting (BEPS) initiative. Changes will affect:

  • The concept of permanent establishment
  • Foreign transparent vehicles
  • Rules concerning credits for tax paid to other countries
  • Hybrid mismatch rules
  • Measures concerning private equity managers
  • Rules relating to deductions for payments for labour subcontracting agreements
  • New limits for interest deductions
  • Joint liability
  • General anti-avoidance
  • Fiscal crimes
  • VAT imposed on certain services provided via digital platforms

Who will this affect?

Mexican taxpayers and foreign companies with Mexican operations should review their existing structures and planned activities to make sure they comply with the new rules. The Reform may mean that changes to your clients’ existing structures are recommended and you should urge your clients to discuss this with their tax and legal advisors as soon as possible.

How can we help?

Please speak to Emilio Miguel, Marina Cristiani or Mariano Marco who can help to make sure that you remain compliant. We will be contacting many of you directly in the following weeks to discuss your clients’ needs and how we can assist further.

Please note: JTC does not provide tax advice and clients should obtain their own independent tax advice as appropriate.

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