Mexico: Transfer pricing proposals in economic package for 2022

An economic package for year 2022 includes proposed changes to transfer pricing rules

An economic package for year 2022 includes proposed changes to transfer pricing rules

Mexico’s president on 8 September 2021 presented to the Mexican Congress an economic package for the year 2022.

The package includes proposed changes to the transfer pricing rules.

While the economic package does not propose any new taxes or increases to the existing taxes, it is possible that changes could be made during the legislation process.

Summary of transfer pricing proposals

  • Under the economic package proposals, the requirement to create and retain transfer pricing documentation would also apply to transactions and operations with domestic related parties. There would also be a requirement for a functional analysis with regard to the related parties with whom the transactions are conducted.
  • Similarly, the comparability elements would be required to be documented for each transaction and for each related party. Taxpayers would be required to include in the supporting documentation certain details about the comparability adjustments, and the accounting records would need to identify transactions with related parties—both foreign and domestic.
  • The requirement to file an information return reporting transactions with related parties would be due no later than 15 May (instead of 31 December) of the immediately subsequent year, and this would apply to transactions with related parties—both foreign and domestic.
  • The determination of accrued income and authorized deductions would need to consider not only the prices but also the profit margins that independent companies would have used, being consistent with the transfer pricing rules.
  • Information of comparable companies would need to be for the year under analysis and the use of information from two or more years would only be acceptable if it is shown that the business cycle or commercial acceptance of a product covers several years.
  • Regarding maquiladoras, the ability to request an advance transfer pricing resolution (or advance pricing agreement or APA) would be repealed, leaving only the option of a “safe harbor” method for these entities. It would also be established that compliance with the safe harbor would have to be reported in the information return of the manufacturing companies, maquiladoras and export services (DIEMSE as per its acronym in Spanish) no later than June of the immediately following year. Similarly, the ability for “shelter maquilas” to request an advance resolution of transfer prices would be eliminated, leaving the “safe harbor” as the only option.

Read a September 2021 report prepared by the KPMG member firm in Mexico

 

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