Worldwide transfer pricing reference guide 2014

Mexico (continued)
Return disclosures/related party disclosures (continued)
• Application of primary and/or corresponding adjustments
• Tax ID of the adviser/preparer of the transfer pricing documentation
• Confirmation of deduction of pro-rata charges
• Information regarding financial derivative operations
• Information regarding thin capitalization
• Maquiladora rules compliance
• Transfer pricing questionnaire related to the review conducted by the external auditor (not included in the Alternative Information to the
Tax Report file):
• Questions regarding the confirmation of all aspects related to cross-border and domestic intercompany transactions
Transfer pricing documentation must be readily available as part of the accounting records by 31 March. An aggressive interpretation
of the ITL, taken by the SAT, and confirmed by a tax court case is that failure to comply with the documentation requirements results in
non-deductibility of payments to related parties.
Transfer pricing-specific returns
Exhibit 9 of the Multiple Informative Return (DIM) for transactions carried out with foreign related parties, as well as Manufacturing,
Maquiladoras and Export Services’ Informative Return (DIEMSE) for transactions carried out under the maquiladora regime, and Tax
Report questionnaires.
Frequency of tax audit and transfer pricing scrutiny by the tax authority
There is a high likelihood of a tax audit for business restructuring (limited risk structures, migration of intangible property and
centralization of functions and risks in favorable tax jurisdictions), highly leveraged structures, cost-sharing agreements, and pro rata –
based charges in general, including management fees.
SAT’s internal criteria related to tax positions, which include transfer pricing comments is still valid 1 . Most of these rules regarding
transfer pricing are related to formal documentation requirements for Mexican taxpayers carrying out intercompany transactions with
both domestic and foreign related parties. These criteria are some of the areas upon which SAT focuses during transfer pricing audits, in
addition to substantive and technical issues regarding compliance, planning and transfer pricing documentation.
APA opportunity
Unilateral and bilateral APAs are available under Article 34-A of the FFC and Mexico’s tax treaties respectively. Unilateral APAs can cover
the fiscal year of the application, the three subsequent fiscal years and a one-year rollback.
Starting 2014, self-assessment option for maquiladoras will no longer be available. As such, Mexican contract manufacturers with an
IMMEX program will have to choose between applying Safe Harbor rules (taxable profit being the greater of applying a 6.5% return over
total costs, or 6.9% return over total assets — including assets and inventories on consignment property of foreign parties but used
in the manufacturing activity), or pursue an APA. An increasing amount of unilateral and bilateral APAs is expected derived from this
new obligation.
Expected reaction to OECD Report on BEPS
BEPS recommendations are being actively adopted by Mexican tax authorities, both on ITL, Tax Regulations and Administrative Rules, as
well as on transfer pricing audit criteria developed by SAT’s personnel.
1 Last update 23 July 2012
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