Mexico: Mexican tax reform proposal approved by the Mexican Congress

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Mexico: Mexican tax reform proposal approved by the Mexican Congress

cuellar.jpg

gonzalez.jpg

David Cuellar


José Antonio González

As mentioned in the last month report, on September 8 2013 the executive branch of the Mexican government submitted to the Mexican House of Representatives the original tax reform package. The latter approved the package on October 17 2013, and finally on October 31 2013 the Mexican Congress approved the 2014 Mexican tax reform package. The new tax provisions will enter into force from January 2014, after its publication in the Mexican Official Gazette. Some of the most important amendments of the Mexican tax laws may be described as follows:

  • A new Mexican Income Tax Law will be enacted, so the current 2002 Income Tax Law will be repealed.

  • Flat Tax Law (IETU) and the Tax on Cash Deposits Law were repealed.

  • The corporate income tax rate will remain at 30%. However, top tax rate applicable to individuals will be increased from 30% to 35%. This is also the withholding tax rate applicable to some payments abroad.

  • 10% income tax withholding is imposed on dividends distributed to resident individuals or foreign residents regarding profits generated as from 2014. Note that reduced withholding tax rates may apply through the application of tax treaties.

  • For treaty application, the Mexican tax authorities have the ability to request a foreign related party to provide a sworn statement, issued by its legal representative, stating that the item of income for which a treaty benefit would be claimed is subject to double taxation.

  • Specific limitation rules apply on the deductibility of technical assistance, interest and royalties, when those are paid to a foreign entity that controls or is controlled by the Mexican entity and certain conditions are met.

  • Deductions for tax-exempt salaries and benefits will be limited to 53% of such amounts, except when the employer reduces the employees' benefit package. In this last case, the deduction will be limited to 47%.

  • The option to depreciate certain assets on an accelerated basis was eliminated.

  • The existing tax consolidation regime is repealed. Taxpayers may elect to apply for a new tax consolidation regime that would allow a three-year income tax deferral period.

  • Several changes apply to the "Maquiladora" tax regime such as the definition of "Maquiladora operation". Now, revenues associated with productive activities must now be derived solely from Maquiladora activities. Also, the effective income tax rate on maquila profits will increase to 30%. Other transfer pricing and VAT changes are applicable for Maquiladoras.

  • Regarding VAT, the rate in the border zone will increase from 11% to 16%. The proposed VAT on mortgage interest, sales or leases of dwellings and tuition has been eliminated from the bill.

  • VAT Law will tax the alienation of goods located in Mexico, between a foreign resident and a "Maquiladora", at the regular 16% rate.

  • The filing of the statutory tax audit report (dictamen fiscal) will now be optional for specific taxpayers. Instead the taxpayers are obliged to provide certain information requested by the Mexican tax authorities.

David Cuellar (david.cuellar@mx.pwc.com) and José Antonio González (jose.antonio.gonzalez@mx.pwc.com)

PwC

Tel: +52 55 5263 5816

Fax: +52 55 5263 6010

Website: www.pwc.com

more across site & shared bottom lb ros

More from across our site

Whether it be due to a fragmented advisory market or a rise in M&A, Italy’s frenetic hiring has not gone unnoticed by ITR’s Talent Tracker
The deal gives Azets 14 new partners and boosts its Swedish revenues to over $100 million; in other news, Svalner Atlas launched in Copenhagen
The tax technology company will be providing a free demonstration of its OTP software and offering best practice advice on whether to ‘buy or build’ on September 8
Johanes Glorinus Saragih of Indonesia’s Directorate General of Taxes outlines the nation’s delicate geopolitical situation, as it sits between a rock and a hard place with the US and pillar two
The law firm’s head of tax, trade and wealth management likens tax legislation to a complex puzzle, recommends a sturdy coffee mug, and explains why acronyms make tax cool
The global tax and accounting firm has appointed two experienced TP advisers from a New Jersey-based boutique
A lack of commitment from major jurisdictions and the associated compliance burden are obstacles facing the OECD initiative
Richard Gregg is no longer fit and proper to be a tax agent, said the TPB; in other news, MHA completed its acquisition of Baker Tilly South-East Europe
Recent Indian case law emphasises the importance of economic substance over mere legal form in evaluating tax implications, say authors from Khaitan & Co
PepsiCo was represented by PwC, while the ATO was advised by MinterEllison, an Australian-headquartered law firm
Gift this article