Doing Business

Doing Business in Mexico 2015

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113 Doing Business in Mexico 2015 which might prevail in the near future. Tax authorities have publicly announced their intentions to thoroughly review international structures that could result in Base Erosion and Profit Shifting (BEPS), aligning their efforts to those of OECD countries, and following the appropriate recommendations. Clearance procedures Under the rules of the Tax Code, taxpayers may request advance rulings on actual and concrete specific situations before carrying out a significant transaction if they desire to have legal certainty as to the effects of a proposed transaction. However, such rulings are not easy to secure, and the process can be lengthy and time-consuming. If the ruling adversely affects the taxpayer's interests, its effects may be overcome by securing annulment in the tax court. For this reason, it is imperative that a potential confirmation request be evaluated thoroughly from its viability stage. Income tax Concepts of income taxation In general, the federal income tax system is an all-inclusive system with certain exceptions, most notably in the case of some types of interest received by individuals. Interest from the Mexican financial system is taxed at a flat rate and may be credited in the overall annual personal return. The federal corporate tax rate is 30%. Provisions designed to recognize the effects of inflation for tax purposes in the areas of monetary assets and liabilities (monetary correction) and depreciable assets are incorporated in the law. Resident individuals are subject to Mexican income tax on their worldwide income, regardless of their nationality, at graduated rates reaching 35% for individuals with income exceeding Ps3 million in the year. Non-resident corporations and individuals are subject to tax on their various types of Mexican-source income treated separately, but if they are considered to have one or more permanent establishments for income tax purposes in Mexico, all income attributable to such establishments must be consolidated in a single annual return. Non-residents, including Mexican citizens who can prove residence for tax purposes in a foreign country, are taxed only on their Mexican-source income. Mexican citizens need to notify their foreign residency status, with special rules and restrictions applicable in the case of expatriation to low tax jurisdictions. Business entities that have established their main administration or their effective management in Mexico are considered to be tax residents of Mexico. 13

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