All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Mexico signs tax treaty with Hungary

Mexico, with the largest treaty network in Latin America, signed a new tax treaty with Hungary at the end of June.

cuellar.jpg
costello.jpg

David Cuéllar

Rachel Costello

On June 24 2011, representatives from Hungary and Mexico signed a tax treaty which will enter into force after the exchange of ratification instruments and notes are carried out, the treaty is approved by the Mexican senate and it is published in the Official Gazette.

Taxes covered

The treaty covers income tax and flat tax for Mexico and corporate and personal income tax for Hungary, and other income taxes of similar nature in force after the treaty has been signed.

Residence

The protocol of the treaty provides that pension funds should be considered as a resident of a contracting state, notwithstanding that the general rule only covers those entities that are subject to tax.

Permanent establishment

The PE definition includes a provision of professional services (including consulting services) rendered by individuals or entities lasting more than 183 days in a 12 month period, as well as construction or installation projects (or supervising activities related to those) lasting longer than six months.

Dividends

The maximum treaty withholding tax (WHT) on dividends is 5% where the beneficial owner is an entity with a direct participation of at least 10% of the capital of the distributing entity. In all other cases, the maximum WHT rate is 15%. Note that there is no withholding tax obligation under Mexican domestic law for dividends paid.

Interest payments

WHT on interest should not exceed 10% if the beneficial owner is resident of a contracting state.

There are certain exceptions for loans with government entities, central bank, government financial entities or others agreed by the contracting states. The treaty broadly defines interest to include all items treated as interest in the source country.

Royalties

Royalties are taxable at a maximum 10% WHT rate where the beneficial owner is a resident of a contracting state. Under the treaty, royalties include payments for the use of equipment as well as payments related to the transfer of rights or goods which are conditioned to the productivity, use or disposal of those rights or goods.

Capital gains

Capital gains obtained from the sale of shares or other comparable goods should be taxed at source when more than 50% of the value of the shares derives, directly or indirectly from immovable property located in the other contracting state.

Also, direct sales of shares are taxed when the seller (with its related parties) has had a capital participation of at least 25% at any moment in the 12 months before the disposal of those shares.

Other considerations

The treaty also includes limitation of benefits, non-discrimination and mutual agreement procedure, and exchange of information articles.

David Cuéllar (david.cuellar@mx.pwc.com) & Rachel Costello (rachel.costello@mx.pwc.com)

PwC

Tel: +52 55 5263 5816

Fax: +52 55 5263 6010

Website: www.pwc.com

more across site & bottom lb ros

More from across our site

The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
The Malawian government has targeted US gemstone miner Columbia Gem House, while Amgen has successfully consolidated two separate tax disputes with the Internal Revenue Service.
ITR's latest quarterly PDF is now live, leading on the rise of tax technology.
ITR is delighted to reveal all the shortlisted firms, teams, and practitioners for the 2022 Americas Tax Awards – winners to be announced on September 22
‘Care’ is the operative word as HMRC seeks to clamp down on transfer pricing breaches next year.
Tax directors tell ITR that the CRA’s clampdown on unpaid taxes on insurance premiums is causing uncertainty for businesses as they try to stay compliant.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree