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Latin American Tax: Special Report

Author:Mr Alejandro Barrera
Profession:Basham, Ringe y Correa, S.C.

Mexico is experiencing a rough time, economically speaking at the moment, but hopes are high for better times ahead. With new tax laws and a relatively young government, these are interesting times for this country. To find out more about how the recent tax reforms will affect Mexico and the other taxation issues that are impacting the economy, Lawyer Monthly speaks to Alejandro Barrera, tax partner of Basham, Ringe y Correa, S.C., a Mexican full-service law firm.

How favourable is the tax regime in Mexico? Are there any advantages of conducting business in Mexico from a tax perspective?

As of January 1, 2014 a major tax reform came into effect including the amendment to eight different tax laws and the repeal of the tax deposits in cash and the single rate business tax.

The new tax regime in Mexico is similar to those of developed countries, however Mexico is still a developing country therefore the tax regime should be consistent with this fact and thus offer reasonable incentives to attract national and foreign capital to invest into Mexico especially when the international economic environment is not favorable.

However, when drafting the proposal of the amendments to the tax laws, the economic perspective was very different from the current situation. Oil prices were over USD$100.00, labor reforms were enacted to make the labor hand more productive, Antitrust amendments were enacted to permit stronger competition in the market, energy sector was open to private investors, so the business environment was very favorable and optimistic when the Mexican Government drafted the proposals for the Tax Reform.

The economic boost that the newly enacted reforms were expected to bring were enough to provide national and foreign capital an unprecedented attractive which would disregard any downside of a tax reform oriented mostly in increasing collection of taxes, reduce tax benefits to taxpayers which created "economic distortions" and even further adopting some of the Base Erosion Profit Shifting ("BEPS") recommendations made by the OECD. Reforms where passed, however the fall on the prices of oil change dramatically the growth expectations of the country and so the new tax regime in effect as of 2014 is not consistent with the current economic situation.

However, just recently Executive sent two proposals to the Congress to grant certain tax relieves to conduct business in Mexico: the first one is a proposal to amend certain tax laws, specially...

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