Doing Business

Doing Business in Mexico 2015

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149 Doing Business in Mexico 2015 Groups not consolidating at December 31, 2013 must file a request by August 15, 2014 to join the new regime, in which case, they may opt to apply the regime as from 2015. Corporate reorganizations Mexican law no longer provides for tax-free reorganizations when non-Mexican entities are involved. However, the tax authorities may authorize the deferral of taxes that would otherwise be triggered by the transfer of shares through a reorganization of companies belonging to the same group, such as mergers and corporate spin-offs. The authorization must be obtained prior to the share transfer. The tax deferred is determined considering an arm's length price. This tax, adjusted for inflation, is payable upon the sale of the originally transferred shares outside the same economic group. An economic group consists of companies 51% or more of whose voting shares are held by the same ultimate parent company. The representative is jointly liable for the tax on the sale of shares, even when a statutory report is issued by a public accountant. In principle, such authorizations for deferral are not granted if the party acquiring or selling the shares is a resident of a tax haven or of a country that has not signed a broad exchange of information agreement with Mexico. However, in the latter case, an authorization may still be granted if the taxpayer provides documentation to the Mexican tax authorities stating that the taxpayer has authorized the foreign tax authorities to provide information to the Mexican authorities regarding the transaction for tax purposes. If the sale of shares qualifies as an exempt reorganization under tax treaty rules the non-resident must appoint, prior to the sale, a legal representative in Mexico and file a notice with the Mexican tax authorities informing them of such appointment and the details of the reorganization process intended to be effected. Additionally, certain formal requirements have been established in the Regulations of the Mexican Income Tax Law that must be complied with when carrying out this type of transaction. Tax treaty provisions may be applied in lieu of domestic law rules when the seller resides in a tax treaty country. (See Chapter 17 for further discussion of taxation of reorganizations). Other taxes Value-added tax A Value Added Tax (VAT), discussed in more detail in Chapter 23, is payable at the general rate of 16% on sales of goods and services, as well as on rents and imports of goods and services. Medicines and food products are subject to VAT preferences, as discussed in Chapter 23. Excise tax Mexico imposes excise tax on certain products and services. See Chapter 13 for more details. 15

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