Article 76-A Of The Income Tax Law (ISR) Implications For Transfer Pricing - Tax - Mondaq Mexico - Mondaq Business Briefing - Books and Journals - VLEX 809408417

Article 76-A Of The Income Tax Law (ISR) Implications For Transfer Pricing

Author:Mr Martín Márquez Rojas
Profession:Mazars
 
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Mexico, as a member of the Organization for Economic Cooperation and Development (OECD) as well as the Group of 20 of the most industrialized countries (G20) and other international organizations, is committed to participating and implementing in its legislation the international agreements reached regarding cooperation in the exchange of information and coordination of efforts in fiscal matters.

I) Introduction.

Mexico, as a member of the Organization for Economic Cooperation and Development (OECD) as well as the Group of 20 of the most industrialized countries (G20) and other international organizations, is committed to participating and implementing in its legislation the international agreements reached regarding cooperation in the exchange of information and coordination of efforts in fiscal matters.

To this effect, the OECD and the G20 (primarily) have developed 15 lines of action to combat what is known as "Base Erosion and Profit Shifting (BEPS)", which are intended to limit the opportunities for transfers of capital through strategies or (principally intercompany) transactions that tend to reduce the tax burdens of Multinational Groups.

In particular, the objective of the 13th line of action listed in the BEPS is to require taxpayers to prepare a complete "package" of information regarding their operations with related parties, allowing Tax Authorities (TAs) to: i)evaluate their risks in terms of transfer pricing, ii) have sufficient information to appropriately direct their taxation efforts, and iii) make effective use of the auditing resources and efforts they have deployed.

II) Obligation in Mexico.

Article 76-A of the income tax law (Ley de Impuesto Sobre la Renta, or LISR) establishes the obligation to submit informative declarations on transfer pricing for the taxpayers indicated in article 32-H paragraphs I, II, III and IV of the Federal Tax Code (Código Fiscal de la Federación, or CFF). The three new declarations that must be presented are the following:

1) Master File - Provides the TA with global information about the Multinational Enterprise Group (MNE) to which the (local) taxpayer belongs. It must contain information about the MNE's activities and lines of business, about its global transfer pricing policy, and about the global distribution of its revenues between countries and economic activities.

2) Local File - In contrast to the Master File, this declaration provides the TA with very specific information...

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