2020 Mexican Tax Reform
|Author:||Mr Rafael Sánchez and Blanca Pineda|
|Profession:||Cuesta Campos Abogados|
On December 9th, 2019, it was published in the Official Gazette a Decree whereby: (i) the Income Tax Law (ITL), (ii) the Value Added Tax Law (VATL), and the (iii) Federal Tax Code (FTC) were modified. These amendments came into effect on January 1st, 2020.
The most relevant modifications are the following:
Income Tax Law
Permanent Establishment (articles 2 to 3 of the ITL):
The Permanent Establishment (PE) concept was broadened, considering that a PE will be constituted even if that individual does not have a business place in Mexico, when a non-resident does commercial acts in the Mexican territory through a person other than an independent agent, when he normally concludes or leads to the conclusion of agreements by the non-resident and carry out the following: They are held in the name or on behalf of the non-resident; They sale the property rights or the granting for temporary use or benefits of assets; or They bind the non-resident to provide a service. It will be presumed that an individual or a company are not an independent agent when they are acting exclusively or almost exclusively on behalf of a foreign related party. The exempt activities set forth in Article 3 of the ITL shall not be considered to constitute PE only when the activities or the overall activity is to carry out preparatory or auxiliary activities regarding the business activity of the non-resident. The development of propaganda activities for the provision of information, scientific research, preparation for loan placement, as long as they are preparatory or auxiliary, are added to the list of activities exempt from constituting a PE. Likewise, it is contemplated that the non-resident who establishes a business location within the Mexican jurisdiction for the preparation or assistance for the celebration of business activities will not be considered a PE, which will not be applicable when the non-resident performs in one or more places of business in the national territory functions that: Are complementary as part of a cohesive business operation. Are part of a cohesive business operation, but whose combination of activities results in not being preparatory or auxiliary. b. Payments and income. Fiscally transparent entities and private equity funds (Article 4-A to 4-B of the ITL):
It is contemplated that the fiscally transparent entities and private equity funds, regardless of whether all or part of its members, partners, shareholders or beneficiaries accumulate their income in their country or jurisdiction of residence, will be considered as entities, and must pay the corresponding Income Tax (IT). In the same way, it is established that when the fiscally transparent entities and private equity funds have their main administration or their effective management headquarters in Mexico, shall be considered as Mexican resident for tax purposes. entities.
When a Mexican or a non-resident with a PE in Mexico gets income through a foreign transparent vehicle or private equity funds, he will not be taxed under the preferential tax regimes provision, and must accumulate his corresponding income according to his participation established in that entity, for which they are bounded to pay the Income Tax for the income obtained through the fiscally...
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