KPMG report: BEPS 2.0 implementation considerations for Mexico

KPMG professionals in Mexico prepared a report discussing BEPS 2.0 implementation considerations for Mexico.

KPMG report

Pillar One

Tax professionals do not currently expect companies in Mexico to be significantly affected by Pillar One, but that could change depending on how the following issues relating to Pillar One evolve:

  • The scope of industry or sector exclusions
  • The definition of the tax base and the treatment of losses
  • Establishing the source of income rules
  • The scope and operation of the safe harbor mechanism for marketing and distribution, including the tax base (returns on local sales, local tangible assets, local costs) and the magnitude of routine returns
  • The elimination of double taxation, including the identification of the taxpaying entity, the definition of “residual benefit” and prioritization among multiple paying entities
  • The scope of unilateral measures that may be eliminated

Pillar Two

With respect to Pillar Two, Mexico has expressed its intention to adopt the global anti-base erosion (GLoBE) rules (including the income inclusion rule (IRR), the under tax payments rule (UTPR) and the subject to tax rule (STTR)) once finalized.

However, tax professionals believe there are still points that need to be clarified regarding the calculation of the effective rate of 15%, since it is based on financial profits—which may not align with the fiscal systems of all countries and could thus generate distortions.

Based on current revenue expectations, around 100 companies in Mexico (including publicly traded as well as private companies) are expected to fall within the scope of Pillar Two.

Read a May 2022 report (Spanish) prepared by the KPMG member firm in Mexico

 

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