Doing Business

Doing Business in Mexico 2015

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127 Doing Business in Mexico 2015 Chapter 15 Taxation of corporations Investor considerations • Mexican corporations are taxed on worldwide income. • A 30% corporate tax rate is imposed on net taxable income. • Net Operating Losses may be carried forward for 10 years. Capital losses (i.e. losses on the sale of shares) can only be carried forward against the same kind of income. • Thin capitalization rules provide for a 3:1 debt to equity ratio. Interest arising on excess indebtedness is not deductible. • Interest paid to a related party may be treated as a dividend in certain circumstances (e.g. on back to back loans). • Although inflation rates have decreased in recent years, leveraged corporations must recognize an inflationary gain as additional taxable income and an inflationary loss as a deductible expense. • Residents abroad and Mexican individuals will be subject to an additional 10% withholding tax on dividends paid from profits generated as from 2014, considered a definitive payment. • Dividends from after-tax earnings are not subject to additional taxation at a corporate level. • Capital gains are wholly includable in gross income and are taxed at the same rate as ordinary income. • All inter-company transactions are scrutinized closely and are subject to contemporaneous documentation requirements to support inter-company prices. • Deduction of cost of goods sold was re-introduced as of 2005, replacing the deduction of purchases. • Business Flat Tax, which was an alternative tax to the income tax, has been repealed as from 2014. • Cash Deposit tax has been repealed as from 2014; however, entities belonging to the financial system must report annually on cash deposits received by taxpayers in accounts opened in their name when the total amount exceeds $15,000 per month. • As from 2014, the tax consolidation regime was eliminated. However, a new regime of "integration" has been created for corporate groups, based on a shareholding participation of 80%, to defer certain amount of income tax over a maximum of three years. • Tax holidays are not available for federal taxes. • Employee statutory profit-sharing payment is deductible. • As from 2014, the special regime for Real Estate Investment Corporations ("SIBRAS") is eliminated, prevailing the public Real Estate Investment Trusts. The deferred gain on SIBRAS should be paid no later than 2016. • Specific rules are applicable for recognition of un-remitted income arising from investments in preferential tax regimes (tax haven rules). 15

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