Find out what our experts have to say about the update of the Transfer Pricing Obligations in Mexico for the Fiscal Year 2019.
I) Obligation to document (Transfer Pricing Study).
Article 76, sections IX and XII of the Income Tax Law (LISR for its initials in Spanish) establishes the obligation on behalf of the taxpayer to produce and retain documentation proving that its transactions involving revenues or deductions carried out with related parties were in compliance with the Arm's Length principle1, as well as the legal requirements with respect to transfer pricing (TP study).
Section IX: Related parties residing abroad. Section XII: Local related parties
Taxpayers subject to these obligations
Article 76 section IX paragraph II lists the taxpayers exempted from this obligation:
Taxpayers with business activities whose revenues in the prior fiscal year did not exceed MX$13'000,000.00 pesos are exempt. Taxpayers whose revenues derived from the provision of professional services in the prior fiscal year did not exceed MX $3'000,000.00 pesos are exempt. Taxpayers that, despite not exceeding the aforementioned revenue thresholds, are presumed to carry out transactions with companies or entities subject to preferential fiscal regimes are not exempt. (Article 179, penultimate paragraph of the LISR). Although Article 76 section IX paragraph II of the LISR establishes which taxpayers are exempt from the obligation to produce and retain a transfer pricing study, it does not completely excuse them from all obligations with respect to transfer pricing matters; in the event of an audit by the Tax Authority (TA), it will be necessary to prove that transactions carried out with related parties were in compliance with the Arm's Length principle.
Article 179 of the LISR, paragraphs V and VI, indicates that those taxpayers that are considered to be related parties are obligated to retain information regarding any intercompany transactions they may have carried out in order to ensure compliance with the Arm's Length principle and facilitate audits by the TA.
c)Transfer pricing methods
Article 180 of the LISR lists the transfer pricing methods (approved by the OECD) for the determination of prices, amounts, or margins for considerations made between related parties in accordance with the Arm's Length principle.
Section II of that same Article indicates that, through statistical measures, a market value range must be calculated in...