Energy Reform - Chapter V: VAT Implications - Tax - Mondaq Mexico - Mondaq Business Briefing - Books and Journals - VLEX 576595466

Energy Reform - Chapter V: VAT Implications

Author:Turanzas, Bravo & Ambrosi
Profession:Turanzas, Bravo & Ambrosi
  1. Acts subject to 0% VAT rate

    Article 33 of the LISH provides that acts or activities that cause VAT for which Considerations set forth in the Contracts for Exploration and Extraction of Hydrocarbons must be paid, shall be subject to the 0% rate for purposes of such tax.

    This means that the several considerations that must be paid under such Contracts shall be subject to 0% rate. As a matter of fact, let us be reminded that pursuant to the provisions set forth in Article Transitory Fourth of the Decree for constitutional reform of the Energy Reform, and the LH and the LISH, provide the following regime for contractual considerations:

    In cash, for Service Contracts. A percentage of the profits, for Contracts of Shared Profits. A percentage of production obtained, for Contracts of Shared Production. Transfer of Hydrocarbons for money, once these have been extracted from the subsoil, for License Contracts. Hybrids, that is, any combination of the above-mentioned. This way, payment of the above-mentioned considerations shall be taxed with 0% rate, which will regularly create a favorable balance for Contractors of this tax. This is such considering that they may credit all of the VAT that is transferred to them by their suppliers of goods and services against VAT caused at the 0% rate in connection with payment of their respective considerations. Such situation is increased if we consider Contractors have the exclusive activities of participating in upstream projects, and are not entitled to receive ordinary income for any other kind of activities.

    The above-mentioned 0% rate regime shall not be applicable to any other kind of Contracts or transactions executed with third parties that take part in the Contracts for Exploration and Extraction of Hydrocarbons.

  2. Determination of VAT by members of consortia

    We have said that private parties and EPE make take part in Exploration and Extraction operations of Hydrocarbons individually, by consortia or by a Joint...

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