The new Mexican Income Tax Law ("MITL") that entered
into force on January 1 modified the so-called procedural
provisions concerning the application by multinational companies of
benefits set forth under tax treaties negotiated and executed by
Mexico.
Accordingly, foreign residents claiming tax treaty benefits
(either for a tax exemption or for a reduced withholding tax rate)
should comply with the following requirements; otherwise,
withholding agents will not apply these benefits and could withhold
taxes up to a 35 percent general tax rate for Mexican-source
taxation for foreign residents:
- Provide a certificate of tax residency issued by foreign tax authorities or a certification from these authorities that the foreign resident filed its tax return (this is the only requirement that was needed up to 2013).
- Appoint, through a power of attorney (granted before a foreign notary and apostilled or legalized by the Mexican consulate) a Mexican tax resident as its legal representative for tax purposes in Mexico.
- File, through the legal representative for tax purposes, either an informative tax return or a tax report.
For related party transactions, the tax authorities may request
that the filer, through the legal representative for tax purposes,
file a declaration under oath stating that the income subject to
income tax in Mexico is also subject to income tax in the country
of its residence. This declaration should expressly indicate the
specific legal grounds for such foreign taxation, as well as any
other documentation that, to the taxpayers' criteria, may be
useful to prove such circumstance.
According to Article 26, Section V of the Federal Tax Code, and
Article 208 of the MITL, Mexican taxpayers that accept the role of
legal representative (for tax purposes) of a foreign taxpayer will
be jointly and severally liable for the unpaid taxes of the foreign
taxpayers and will be obligated to keep, for a period of five
years, all documents and information related to Mexican source
income of said foreign taxpayers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
