Thursday, 18 May 2017

Mexico Publishes Modifications to Transfer Pricing Documentation Requirements

On April 3, 2017, Mexico’s Office of the Taxpayer Advocate (PRODECON) published a final report for presenting the master file, local file and country-by-country (CbC) report under Article 76-A of the Income Tax Law. These documentation requirements apply from January 1, 2016, with initial CbC reports due by December 31, 2017 for the 2016 tax year.

Through a public consultation, multinational companies, tax consulting firms and other organizations issued comments with respect to the rules. As a result of these comments, the following reporting rules were modified:

  • Local file – replaces local transfer pricing documentation requirements.
  • Local file – no longer a requirement to file financial statements and tax returns of foreign related parties.
  • CbC report – Mexican groups can file one report for the group.
  • Master file – should meet Action 13 requirements.
  • Master file – only five products/services or products/services representing more than 5% of group income should be reported.
  • Master file – clarification of terms, such as multinational business group, intangible assets and business restructuring.
  • Master and local file – English version of master file is acceptable, as well as for intercompany agreements and business descriptions of comparables in local file.
  • Local file – Description of intercompany transactions.
  • Master file and CbC report – Can be reported in foreign currency.
  • Local file – analysis may establish that intercompany transactions are in accordance with arm’s-length principle.
  • Local file – only advance pricing agreements available to the Mexican taxpayer should be provided.
  • Master file – can submit electronically.
  • Master file – all entities subject to filing master file must file only one document for the group.

Source: Thomson Reuters