On October 31, 2017, the Mexican tax authority (Servico de Administracion Tributaria or SAT) announced that its online platform and electronic forms will be ready starting on November 1, 2017, for taxpayers to file their new transfer pricing documentation (i.e., country-by-country (CbC) report, master file, and local file).
Editor’s Note: This means that there will likely be no extension by the SAT for filing initial CbC reports in Mexico, which are due by December 31, 2017.
Background
On November 18, 2015, Mexico published the 2016 Tax Reform, which included transfer pricing documentation requirements in a new Article 76-A of the Income Tax Act (ITA) (Ley de Impuesto Sobre la Renta) that align with the OECD BEPS Action 13 recommendations. The amendments apply from January 1, 2016, with initial CbC reports due by December 31, 2017, for tax year 2016.
The November 18th amendments introduced the following three-tier standard documentation requirements:
- A local file – information on the local taxpayer, its business activities, and related-party transactions.
- A master file – information on the taxpayer’s group, including organizational structure, profit drivers, intangible assets, supply chain, and intercompany financing.
- A CbC report – aggregated information for each jurisdiction in which the taxpayer’s group operates, including the following indicators of economic activities:
- Revenues from related and unrelated parties.
- Profit (loss) before tax.
- Tax paid and accrued.
- Number of employees.
- Stated capital.
- Property, plant, and equipment.
- Royalties paid and received (not included in BEPS Action 13 recommendations).
- Interest paid and received (not included in BEPS Action 13 recommendations).
- Management services paid and received (not included in BEPS Action 13 recommendations).
The CbC report will also have to list all members (including permanent establishments) of the multinational group, describe their economic activities, and list the place of tax residence for each group member (if different from the place of incorporation).
Filing Thresholds
The local and master file requirements will apply to companies with annual revenue in the preceding year exceeding MXN 645 million (to be adjusted yearly).
The CbC reporting requirement will apply to Mexican multinational holding companies (or those that their parent company designate as responsible for filing the CbC report) with consolidated annual group revenue exceeding MXN 12 billion (about €670 million, as of January 1, 2015) in the preceding year.
Penalties
Failure to file the transfer pricing documentation will disqualify Mexican taxpayers from entering into contracts with the Mexican public sector, and subject taxpayers to fines ranging from MXN 140,540 to MXN 200,090.
Use of Documentation Data
On August 29, 2016, the Director of Transfer Pricing Examinations for the SAT, Carlos Perez Gomez Serrano, said during a panel discussion at a conference in Toronto that the SAT intends to use information obtained under the new three-tier documentation requirements for risk-assessment purposes only, in line with the OECD BEPS Action 13 recommendations.
The SAT does not intend to use the new data to audit Mexican taxpayers unfairly.
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