Doing Business

Doing Business in Mexico 2015

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201 Doing Business in Mexico 2015 Chapter 24 Tax treaties Investor considerations • Mexico has tax treaties and agreements to exchange tax information with several countries and is in the process of negotiating others. • Most Mexico's tax treaties follow the OECD model. • Tax treaties provide more flexibility in the type of activities that can be conducted in Mexico, without being considered a permanent establishment. • These treaties reduce or eliminate certain withholding taxes. Tax treaty policy A number of tax treaties have been executed with Mexico's most important trade and investment partners and other countries of strategic interest. Treaty models Mexican treaties are modeled after the 1977 OECD Model Convention. Mexico has registered some reservations about the OECD commentaries. Treaty provisions Treaties mainly restrict the definition of a permanent establishment and reduce or eliminate certain withholding taxes. (See Appendix V and VI). Exchange of information Mexico has executed agreements to exchange tax information with several countries following the OECD Model. It is the stated intention of the Mexican government to execute similar agreements with other countries as a prelude to signing comprehensive tax treaties. (See Appendix VI). Through general rules, the Mexican tax authorities issue a list of treaties that are considered to have a "Comprehensive exchange of information treaty" with Mexico. This is the list of countries that, under the Mexican Tax Authorities criteria, are effectively exchanging information with Mexico. Specific benefits are granted under Mexican tax law for those countries, such as second tier foreign tax credit and the reduction of other reporting obligations regarding investments in tax havens or preferred tax regimes. 25

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