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  • A new Mexican Income Tax Law will be enacted, so the current 2002 Income Tax Law will be repealed.

  • Flat Tax Law (IETU) and the Tax on Cash Deposits Law were repealed.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  • The existing tax consolidation regime is repealed.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

It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
The sprawling legislation phases out Joe Biden-era green tax incentives for businesses; in other news, the UK will reportedly maintain its DST despite US pressure
New French legislation should create a more consistent legal environment for taxing gains from management packages, say Bruno Knadjian and Sylvain Piémont of Herbert Smith Freehills Kramer
The South Africa vs SC ruling may embolden the tax authority to take a more aggressive approach to TP assessments, an adviser tells ITR
Indirect tax professionals now rate compliance as a bigger obstacle than technology and automation; in other news, Italy approved a VAT cut on art sales
AI-powered tax agents are likely to be the next big development in tax technology, says Russell Gammon of Tax Systems
FTI Consulting’s EMEA head of employment tax and reward tells ITR about celebrating diversity in the profession, his love of musicals, and what makes tax cool
Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
The firm’s lack of transparency regarding its tax leaks scandal should see the ban extended beyond June 30, senators Deborah O’Neill and Barbara Pocock tell ITR
Despite posing significant administrative hurdles, digital services taxes remain ‘the best way forward’ for emerging economies, says Neil Kelley, COO of Ascoria
Gift this article