The New Mexican tax reform 2020
The Mexican government has announced a new Mexican tax reform as part of the Economic Budget Project. This tax reform is meant to incorporate fundamentals of the Base Erosion and Profit Shifting (BEPS) initiative of the OECD. The proposed modifications to the Mexican tax system will have a profound impact on Mexican taxpayers. If approved, most of the changes will enter into force on January 1, 2020.
Staying on top of constant law changes can be quite a challenge. This is where we come in. Amicorp has been servicing the Mexican market for many years; we understand the market as well as the impact that changes like these can have on you and your businesses and we are here to assist you.
The tax reform in a nutshell
The most relevant modifications to the Mexican Tax Law and Federal Tax Code are summarized below.
The modification of the Mexican Income Tax Law
- Change of tax treatment of foreign vehicles or legal entities with no legal personality: trusts, funds, partnerships and similar arrangements: income becomes taxable as a Mexican entity;
- Enhancement of control rules in preference tax regimes (REFIPRE): a new definition of control, not only control in distributions but aligned with OECD principles;
- Payments to low-tax jurisdictions and anti-hybrid rules: considered as non-deductible payments when made under “hybrid mechanisms” or “structured agreements”;
- Permanent establishment: new rules of Permanent Establishment definition; and
- Interest expense deduction limited to 30%.
Federal Tax Code
- Joint and several liabilities on evaded taxes for persons responsible for the general management of legal entities;
- Rules for the mandatory disclosure of aggressive tax practices “Reportable Schemes”;
- New General Anti-Abuse Rule (GAAR) to disregard a transaction when this lacks a “business reason” and generates a tax benefit.
Given the broad nature of this tax reform, Mexican taxpayers and any foreign taxpayers with a Mexican operation should review this tax reform and consider to make certain amendments before the end of 2019.
How Amicorp can assist
At Amicorp, we have dedicated teams with in-depth knowledge, local and international, who are ready to help you. No matter the size of your business, and regardless of what your business relationship is in or with Mexico, we can assist you when it comes to assessing your situation and helping you make the right decisions. Services we can offer:
The main consequence for Mexican individuals is that some of the foreign structures for passive investments usually used by Mexican taxpayers may no longer provide tax deferral and may become fully reportable and taxable if they are subject to a low tax rate.
Our approach and solutions:
In coordination with finance, legal, tax, and estate law experts, Amicorp can establish and administer cross border financial investment structures that continue to meet the objectives of global high-net-worth families.
We can offer tailored investment structures with a combination of a corporate entity with an investment fund in reputed jurisdictions with professional asset management. This can be tailored to the objectives of each client and can be combined with a trust to optimize succession planning and governance for HNW families.
Alternatively, we can offer tailored limited partnership for certain financial investments, which structure provides asset protection, confidentiality, and tax optimization by way of reduced tax rates.
With such offerings, we can complement intermediary solutions in investment structuring and under the Mexican tax reform, continue meeting the clients’ objectives of asset protection, governance, tax optimization, business and family succession, and estate planning.
Corporates with cross-border business:
The corporate business environment in Mexico is now being forced to comply with the anti-abuse measures of Base Erosion Profit Shifting (BEPS) as rolled out by the tax reform. This brings along new restrictions as well as more compliance, substance, and reporting requirements that need to be evaluated.
Our approach and services:
Amicorp supports corporate organizations to improve efficiencies and mitigate the impact of the tax reform while dealing with multi-jurisdictional corporate governance items.
Our services pertain to maintaining the good standing of legal entities across its lifecycle and expansion, with full services on international business expansion from Mexico or foreign corporates doing business in Mexico. We take care of governance, directorships, provide economic substance, provide compliance and regulatory reporting to managing regulatory risk so that the client can focus on doing the business. Our teams are experienced in international matters related to investment protection, business financing, transfer pricing, trade-economic zones, intellectual property registration, etc.
Working with Amicorp, we offer access to our extensive network with both the local and international know-how you need to confront these changes head-on.
For more information please drop us an email at email@example.com and one of our experts will contact you as soon as possible.