Mexico-United States: Agreement on transfer pricing, tax treatment of maquiladoras

Mexico-United States: Agreement on transfer pricing

The tax authorities of the United States and Mexico have agreed to continue a transfer pricing approach for maquiladoras engaged in contract manufacturing and assembly operations for U.S. taxpayers through the use of unilateral advance pricing agreements (APAs).


The IRS and Mexico’s Servicio de Administración Tributaria (SAT) agreed to renew the Qualified Maquiladora Approach (QMA) agreement—a coordination arrangement most recently agreed to between the U.S. and Mexican competent authorities in 2016. The QMA allows a U.S. taxpayer to avoid double taxation on the contract manufacturing and assembly functions performed by its maquiladora if the Mexican taxpayer enters into a unilateral APA with SAT’s “large taxpayer division” (Administración General de Grandes Contribuyentes) under terms negotiated in advance between the competent authorities.
According to an IRS release (November 2020), the renewal agreement culminated from lengthy collaborations between the U.S. and Mexican competent authorities addressing SAT’s inventory of unilateral APA requests involving maquiladoras.

  • Over 700 U.S. taxpayers with maquiladoras are expected to qualify for the application of this agreement, thus “providing certainty to hundreds of multinational groups.”
  • In 1999, the U.S. and Mexican competent authorities reached an agreement on transfer pricing and other aspects of the tax treatment of maquiladoras of U.S. multinational enterprises.
  • The 2016 QMA updated and expanded the 1999 agreement to reflect revisions to Mexican domestic transfer pricing rules, documentation requirements, and other tax attributes of maquiladoras.
  • The renewal agreement (November 2020) maintains the “core elements” of the 2016 QMA’s transfer pricing framework, which the competent authorities have agreed continues to produce arm’s length results.   

The IRS release further explains that the renewal agreement has several additional features. Because there are situations in which the maquiladora has an outstanding accounts receivable balance that the competent authorities agree is inconsistent with the transfer pricing profile of the Mexican entity, a mechanism for addressing such situations has been included. In addition to providing certainty for tax years through 2019, the agreement also commits the competent authorities to commence work on another renewal of the QMA to cover tax year 2020 and beyond and to consider during those discussions the implications of current economic, commercial, and public health conditions affecting taxpayers and workstreams. 

Taxpayers may inquire with the IRS Advance Pricing and Mutual Agreement (APMA) program regarding whether the QMA is appropriate for their facts and circumstances or whether a bilateral APA between the United States and Mexico may be more suitable.

Mexico’s SAT will directly notify eligible Mexican taxpayers. Notifications will include details on the steps a taxpayer must take with their pending unilateral APA requests.

Read a November 2020 report (Spanish) prepared by the KPMG member firm in Mexico

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