martes, 20 de septiembre de 2016

Mexico: SAT considering new procedure for maquiladora APAs

Mexico’s Tax Administration Service (SAT) has proposed implementing a new procedure that should expedite the conclusion of advance pricing agreements (APAs) for maquiladoras.

The 2014 tax reform limited the ways in which a Mexican entity operating under the maquiladora regime can demonstrate that it is in compliance with the arm’s length principle under Mexico’s transfer pricing rules. Prior to the reform, a maquiladora could elect one of four options to show compliance, but, as from 2014, a maquiladora may only elect the “safe harbor method” or obtain an APA with the SAT.

The Tax Committee of the National Council for the Exporting Manufacturing Industry (INDEX, the body that represents the maquiladora industry) has been conferring with the transfer pricing officials in the SAT, and recently issued a bulletin reporting on the outcome of meetings relating to issues involving the conclusion of APAs. To obtain an APA, a maquiladora must reach an agreement with the transfer pricing officials on the functions, assets used and risks assumed by the maquiladora; the transfer pricing method applied; the third-party comparables that are used, etc. The process is complicated and typically protracted, leaving the applicant maquiladora in a state of uncertainty as to
whether it is in compliance with the transfer pricing rules.

The bulletin explains that the SAT is proposing to implement a procedure that would expedite the conclusion of APAs, by classifying entities based on how factors of production are used (work force or operating assets) and by determining an annual profit margin based on a method that would apply depending on the classification of the applicant entity.

If the SAT implements the proposed procedure, a maquiladora would be able to opt to apply the procedure by submitting a follow-up request to its original APA request and waiting for the SAT to issue a resolution based on the above factors. If a maquiladora does not opt to apply the procedure, the maquiladora would have to wait for a decision on the original APA application.

The following points should be noted with respect to the proposed procedure:

  • The procedure would facilitate the issuance of APA requests only to the extent that the procedure provides reasonable and similar results to those of the original APA request.
  • The INDEX and the SAT have discussed comparables that would be relevant for the most representative maquiladora industries that typically use a high level of operating assets: (i) automobiles and auto parts; (ii) electronics; and (iii) other assets (e.g. plastics, textiles, etc.).
  • Several issues still need to be resolved between the INDEX and the SAT, but these should be addressed in upcoming meetings. 

Source: Deloitte

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