As reported recently, in October 2015, the rules applicable to trusts dedicated to investment in energy and infrastructure, known as FIBRA E, were released through which the Government seeks to encourage investment in energy and infrastructure projects, within the framework of the Energy Reform.
Since its publication, the rules applicable to FIBRA E have been widely analyzed and discussed with the Mexican tax authorities (MTA), so that with the intention of adapting these rules to the characteristics and needs of the market, the MTA issued on April 1 2016, in the Official Gazette some modifications to the tax rules applicable to FIBRA E.
A summary of the main changes released is included below.
The permitted activities are extended for promoted companies in which the FIBRA E may invest, to include the following: treatment, mixing, processing, conversion and transport of oil and petrochemical or any product derived from petroleum or natural gas without considering their sale, marketing and retail. In the same way, the transport, storage and distribution of hydrocarbons, which are not made under a contract or assignment, may be considered as permitted activities.
Regarding the requirement that at least 90% of the taxable income of the promoted companies come from the activities permitted for them to be considered exclusive, it is clarified that when revenues come from the sale of land and investments, these goods must have been used in the development of the permitted activities during the 12 months prior to its sale.
In connection with the determination of the maximum percentage of 25% of non-monetary assets that are new, in which the promoted companies can invest, it is clarified that these would be considered as new when they have less than 12 months of having been put into operation in Mexico, regardless if they were acquired previously.
Also, exception cases are incorporated to establish that assets acquired or constructed in the normal course of operations of the promoted company to replace assets or to meet contractual obligations under a concession, among other assumptions, will not be considered as new assets, provided that authorization is obtained from the MTA to exclude them from the calculation of the referred maximum percentage.
Among the deductions allowed for promoted companies, it is clarified that these may not deduct the deferred expense arising from the acquisition of the assets related to the exclusive activities; also, they will not be able to deduct payments for lease of land or buildings made to income tax exempt taxpayers, as is the case of pension and retirement funds that are exempt from this tax.
Capital contribution account
The fiduciary obligation to keep a capital contribution account, which will not be individualized for each holder of trust certificates, is included, indicating specific rules for control, increase and decrease, and for the treatment of its repayments.
For its part, it is included within the tax regime of the FIBRA E, the possibility that the trust reacquires its own certificates, provided that the resources for the purchase derives from profits that are not mandatorily shared, that the repurchased certificates are not greater than 5% of the total certificates issued and that the certificates be placed within a maximum period of one year, among other requirements.
Disposition of shares
In the case of the sale of shares in promoted companies to a FIBRA E, it is clarified that the gain or loss on disposal of assets owned by the promoted company will be determined as if it had alienated proportionally land or investments, and the proportional part of the debt that will be added to the price of the shares will be only the part related to such land or investments.
Regarding the gain that promoters obtain from the sale of shares in promoted companies to a FIBRA E, an option to defer the gain is established, provided that they obtain in exchange trust certificates of the FIBRA E. The deferral will proceed in the proportion that the gain corresponds to shares that were disposed of in exchange for certificates and the promoter must include in its taxable income 15% of the deferred gain at the end of each fiscal year. In these cases you may not deduct the deferred expense.
It is clarified that the same exemption applicable to the holders of real estate FIBRA certificates will be applicable to the sale of the trust certificates issued by the FIBRA E carried out by foreign residents.
Contribution of shares
Through a new rule, the possibility to contribute shares issued by companies that can qualify as promoted, without being considered as a disposal for tax purposes, is established, as long as it is a first contribution and it is made in exchange for shares issued by the company that receives the shares.
For purposes of the above mentioned, the authorization from the MTA must first be obtained, and in a period not exceeding six months, a FIBRA E must acquire at least 2% of the promoted company.
Companies receiving as a contribution the shares of the promoted companies must consider as proven acquisition cost of such shares the fiscal cost that they had at that time.
In the case of spin-offs, the required acquisition percentage by the FIBRA E of the shares of the split or spun-off company is reduced from 5% to 2% so it is not considered as alienation for not complying with the shareholding requirement; the purchase must be made within six months.
Some additional details and clarifications to the rules, without involving substantial changes to the taxation of FIBRA E, are incorporated.
The personal in the practice of Tax & Legal of KPMG in Mexico is at your service in order to analyze in a detailed manner the effects that could arise in your business from the application of the provisions above described.