Cross-border Tax Talks

Propósito Principal: Mexican tax reforms

Doug McHoney, PwC’s International Tax Services Global Leader, is joined by Mario Alberto Gutierez, International Tax Partner based in Mexico City, and Leader of PwC’s International Tax Practice in Mexico. Doug and Mario discuss Mexico’s implementation of the multilateral instrument, Mexican tax treaties and the potential for treaty abuse, how the 2022 Tax Act changes the game with regard to share transfers, the Maquiladora regime, the Mexican manufacturing industry more broadly including business transformations and ‘near shoring,’ and debt structures and the ‘inflation adjustment’ in Mexico. Not surprisingly, Pillar Two makes a cameo appearance.

Timestamps:

• 2:30- A lot has occurred recently regarding Mexican Tax updates. Let’s start with the implementation of the OECD MLI. How did we get here?
• 5:40 - How many tax treaties does Mexico currently have?
• 6:50 - What are some things that taxpayers and tax advisors should be mindful of as they’re looking at structures, particularly in regard to treaty abuse?
• 12:15 - One of the other issues related to the MLI is transparency, can you share some more insights?
• 14:30 - With the 2022 Tax Act, Mexico has implemented a business purpose requirement for share transfers. How does that change things?
• 20:25 - How has the Tax Act changed Maquiladoras and the ability to get advanced pricing agreements?
• 23:35 - From a macro perspective, has there been significant additional investment by taxpayers in the Maquiladora regime or Mexican manufacturing industry?
• 25:40 - Companies that use related party debt to finance their work in Mexico have to deal with inflation adjustment. Regarding related party debt, what is the inflation adjustment and why is it so important for non-peso debt?
• 30:50 - Finally, what is going on in Mexico regarding Pillar Two?

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