Mexican Income Tax Law Reform proposal for 2014 limits transfer pricing options for qualifying maquiladora companies

Tax Controversy & Dispute Resolution ()

On September 8, 2013, the Executive Branch of the Mexican government presented its 2014 Tax Reform package to Congress. The proposed package includes reforms to the Income Tax Law, which provide that maquiladoras would only be allowed two transfer pricing options to avoid the Permanent Establishment (PE) exposure for their foreign principals, as follows:

  • Safe Harbor (taxable income equal to the higher of 6.9% of total assets or 6.5% of costs).
  • Obtain an Advanced Price Agreement (APA).