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Reporting requirements increase compliance burden for Mexican taxpayers

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The Mexican tax authorities have just added to the compliance burden of taxpayers by setting out new information reporting requirements relating to topics such as the financing of derivatives transactions, transfer pricing, restructurings and reorganisations.

The Servicio de Administración Tributaria (SAT) has been one of the most vocal revenue agencies in the world about the dangers of aggressive tax avoidance and the release of Form 76 (in Spanish) only confirms that image.

The compliance demand was issued to conform with the Tax Reform Act of 2014, which added Article 31-A to the Federal Fiscal Code. The law requires reporting of relevant transactions to be made within 30 days of the transaction.

For matters in 2014, the form, which must be filed electronically, must be in by January 31 2015. Other jurisdictions, such as the UK, have had disclosure regimes in place for sometime.

Relevant transactions come under five headings: the financing of derivative transactions; transfer pricing; changes in capital structure, and direct and indirect tax residency; restructurings and reorganisations; and other relevant information, such as that relating to sales of intangible and financial assets, and the transfer of goods through mergers or demergers.

The transfer pricing matters that must be reported cover adjustments if they modify more than 20% of the original value of the transaction, or an intercompany transaction of more than MXP$5 million. Royalties transactions using profit-split methods must also be reported.

“Mexican taxpayers must now disclose certain relevant transactions on a regular basis, and report whether these transactions were carried out with a related party or a third party, and whether those parties are entities residing in Mexico or abroad,” wrote PwC in an alert to clients. “This new filing requirement is a further example of the Mexican government’s continued focus on and scrutiny of intercompany transactions.”

Read this exclusive interview with Gloria Suarez, of the SAT, who explains what information the tax authorities are looking for and what the penalties will be if taxpayers fail to provide it.

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