On January 1, 2013, the Income Law for the Mexican Federation (hereinafter, the "ILF") for 2013 entered into force. As it does every year, in addition to setting out an estimate of the revenue that the Mexican state should receive during the forthcoming fiscal year, the ILF contemplates a series of amendments to Mexico's tax legislation in order to achieve this objective. The most relevant topics thereof are the following:
Income Tax Rate for Corporations and Individuals
In the Income Tax Law that entered into force in 2010, the income tax rate was increased from 28 to 30 percent. But it was also provided that for 2013, the tax rate would be reduced to 29 percent (and returned to 28 percent starting in 2014). However, pursuant to the ILF, the 2013 reduction has now been postponed until the 2014 fiscal year, hence maintaining the 30 percent rate for 2013. The 28 percent rate will then apply for 2015 and thereafter. Of course, these reductions could be postponed yet again.
Special Withholding Tax Rate for Certain Interest Payments
The ILF renewed a tax benefit that has been granted on an annual basis since 1999, consisting of a reduced withholding tax rate of 4.9 percent (less than the 10 percent tax rate established in the Income Tax Law) when interest is paid to certain qualified foreign banks and financial institutions, provided that the beneficiaries of such interest are resident in a country with which Mexico has a treaty in force. In order to enjoy this beneficial withholding tax rate, foreign banks and financial institutions must be registered with the Mexican tax authorities via a procedure that takes three to five months to complete.
Tax Amnesty / Cancellation of Tax Credits
The ILF established the cancellation of federal tax credits administered by the Tax Administration Service, compensatory quotas, accessories, formal fines, and inflationary updates as follows:
(i) 80 percent of tax credits attributable to fiscal years prior to 2007, and 100 percent of their surcharges, formal fines, and enforcement expenses derived therefrom, are canceled, provided that the amount not canceled is paid in full in a single installment. Fines for the failure to pay taxes are not...