Article 181 of the Income Tax Law ("ITL") establishes the requirements that must be met in order to consider that taxpayers are performing maquila operations eligible for the transfer pricing safe harbor. Among these requirements, the ITL states that the maquiladora's entire productive activity must derive exclusively from maquila transactions, without providing further detail. Rule I.3.19.1 of the General Administrative Guidelines for 2014 (the "Rule"), initially provided ambiguous guidelines which caused significant confusion regarding the activities that would be deemed compliant maquila activities. To avoid this confusion, on July 4, 2014 the Second Amendments to such Rulings were published, establishing a list of the activities which would be construed as active maquila activities, thus clarifying such safe harbor maquila concept. The list of eligible activities deemed maquila related productive activities are: a) Personnel services, provided by the maquiladora to its related entities. b) Leasing of movable and real property; c) Selling waste & shrinkage of material used in its productive activities; d) Sale of movable assets (excluding inventory and finished products) and real property; e) Interests; and f) Other income related to its productive activity, provided these are different from the ones obtained from the sale and distribution of finished products for its further resale. The foregoing activities are subject to the following requirements: 1. That the amount of income for performing personnel services; leasing movable and real property; selling waste; interests received and other income related to its productive activity, cannot jointly exceed 10% of the total amount of income received for the maquila operations. 2. That accounting records that correspond to maquila operations must be segregated from the rest of the transactions related with such operations, and the companies that enter into such transactions must be clearly identified. 3. That the aforementioned income must be at arm's length and a transfer...
Income Derived From Maquila Related Productive Activity
|Author:||Mr Ricardo Leon-Santacruz and Alejandro Madero Frech|
|Profession:||Sanchez-DeVanny Eseverri, SC|
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