Doing Business

Doing Business in Mexico 2015

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163 Doing Business in Mexico 2015 months, the tax can be paid in the years the installments are actually collected or due under the contract in certain cases. When the purchaser is another non-resident and has no representative in Mexico, the seller is required to pay the tax directly. Fees paid to foreign corporations When the related specific services are rendered outside Mexico by foreign corporations, any fees paid to them are not subject to Mexican income tax, unless the services are classified as technical assistance or publicity, which are taxed by applying the same rates applicable to royalties, regardless of where the services are rendered. On the other hand, any type of fees or commissions paid to tax haven or preferential tax regime entities are subject to withholding tax at a 40% rate, when the transactions are carried out between related parties. Portfolio investments There is no difference in the taxation of income from subsidiaries, portfolio investments or unrelated parties. It should be noted, however, that investment income of foreign pension funds in existence and exempt under the laws of their respective countries is wholly exempt from Mexican income tax. Taxes other than income tax As regards the value-added tax (VAT) described in Chapter 23, permanent establishments of foreign corporations in Mexico are subject to VAT on the same basis as resident business enterprises. Non-residents are required to pay VAT in respect of their activities in Mexico if such activities are subject to the tax, regardless of whether the related income is subject to income tax. Accordingly, VAT would be payable on sales of assets in Mexico other than exempt real estate (land or residential property) and shares or capital interests, whether or not they are taxed under the Income Tax Law. In such cases, the Mexican payer is obligated to withhold the corresponding VAT. The rental of machinery, equipment and real estate from foreign corporations is generally VAT taxed, subject to the withholding mentioned above. In the case of services utilized in Mexico but for which payment is made to non-resident service providers, the Mexican resident making such payments is deemed to be the importer of such services and is required to reflect a VAT liability thereon at the time of making the monthly VAT returns, but may reflect a VAT credit in an equal amount against the liability for tax on the residents' own taxable activities. Regional administrative offices Mexican legislation does not favor the establishment of regional administrative offices. In addition, restrictions on the employment of foreigners may still make it difficult to staff such an office. Operations of this type may have to continue to be assigned to a Mexican subsidiary that also acts as regional headquarters. 16

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