Mexico: Taxpayers must file information declaration of “preferential tax regimes”

Mexico: Declaration of “preferential tax regimes”

Individuals determined to be residents of Mexico (for tax purposes) must file an information declaration of preferential tax regimes in 2017 with respect to fiscal year 2016. The information statement is required when the taxpayer:

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  • Generates income of any kind from any “tax haven” territories, as listed in the transitional provisions of the income tax law
  • Conducts transactions through transparent foreign legal entities or entities

For Mexican tax purposes, a foreign legal entity is considered transparent when: 

  • It is not considered to be a taxpayer with respect to the income tax of the country where it is incorporated or has its main management or effective place of management.
  • The income is attributed to the transparent entity’s members, partners, shareholders, or beneficiaries.

In addition, Mexico’s income tax law considers trusts, associations, investment funds, and any other similar legal structure of foreign law that does not have its own legal personality as foreign legal entities.

Considerations for filing the information return

Although each instance must be separately considered and analyzed, “physical persons” that are residents for tax purposes in Mexico must present this information return or statement if they: 

  • Generate income of any kind in “tax havens” and such income includes but is not limited to, interest, income from leases, dividends, sales of shares, among others, whether or not Mexico has a comprehensive information exchange agreement with the tax haven jurisdiction
  • Perform transactions through transparent foreign legal entities or entities (e.g., a limited liability company or limited liability partnership (LLP) in the United States, when a Form K-1 format is provided) or through a transparent foreign legal entity (e.g., a trust)
  • Have an investment fund in their portfolios held abroad

The Mexican tax authorities are not expected to reissue the rules that would allow non-filing of the return, and thus, it would need to be filed no later than 31 May 2017 to avoid certain penalties.

 

Read an April 2017 report (Spanish) prepared by the KPMG member firm in Mexico

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