The Mexican Congress recently approved with some amendments the official 2020 tax miscellaneous resolution, which modifies several provisions of the Mexican Income Tax Law, and these tax law changes may have an important impact on existing international arrangements for Mexican families. The amendments are intended to align Mexico to the Organization for Economic Cooperation and Development (OECD) recommendations to tackle domestic tax base erosion and profit shifting (BEPS).
New requirement to report international structures and other changes of note
Among the relevant changes taking effect in January 2020 is the addition of a new obligation for Mexican tax advisors to disclose details of their clients' "reportable structures" defined as those involving a tax benefit in Mexico, directly or indirectly, and having at least one of 15 characteristics considered as "areas of risk" specified in the law. The reporting obligation applies to structures established after January 2020. Moreover, Mexican taxpayers, as opposed to their tax advisors, will have the obligation to report any reportable structure established before January 2020 but having a tax benefit in 2020.
Other significant changes to the tax law in addition to the new mandatory disclosure requirements for reportable transactions include new rules on the tax treatment of flow-through entities or arrangements and an expanded general avoidance rule.
A good time to act
With the tax law changes taking effect next month, it is a prudent time for Mexican individuals and families with international arrangements to review with their Mexican tax advisor the new tax legislation and its impact on their structures. Withers Latin America group attorneys are reviewing with Mexican counsel how these new tax changes will impact current holdings of US investments and other arrangements and what the new reporting obligations will be, and are available for consultation alongside Mexican tax advisors.