On January 17, 2017, President Enrique Peña Nieto announced the actions to promote productive investments and employment creation, pursuant to the Agreement for Strengthening and Protecting the Families Economy. Along with other actions, this Agreement includes the Decree that grants incentives for income tax (IT) purposes in connection with investments or deposits received in Mexico. This Decree was published on January 18, 2017, and it seeks to promote and simplify the repatriation of capitals.
In general terms, the Decree grants a tax incentive to Mexican tax residents and foreign tax residents with a permanent establishment in Mexico that obtained income from direct and indirect investments held abroad until December 31, 2016.
Such incentive consists in applying an 8% tax rate to the resources kept abroad before January 1, 2017, which are brought back to Mexico. The resulting tax shall be paid within the following 15 calendar days in which such resources are repatriated.
The Decree applies to income originated abroad that would normally be taxable in terms of Titles I, IV and VI of the Mexican IT Law (Corporations, Individuals, and Preferential Tax Regimes, respectively), and it shall be enforceable for 6 months as of January 19, 2017. Returned capital shall remain invested in Mexico for at least two years as of the date on which it is returned.
In order to qualify for the Decree, corporations shall allocate returned capital on any of the following investments:
Acquisition of fixed assets to be used for their economic activities;
Acquisition of real estate located in Mexico to be used for their economic activities;
Payment of liabilities contracted with independent parties before the entry into force of the Decree; or
Investments in Mexico through credit institutions or brokerage firms.
On the other hand, individuals shall invest their returned capital in financial instruments or shares issued by Mexican companies through institutions recognized by the Mexican financial system, or by allocating it in any of the investments established in letters a., b., or c. from the previous paragraph.
Taxpayers who apply...