Mexican House of Representatives approves 2014 tax reform package

Latin American Tax Newsalert

The Mexican House of Representatives approved the 2014 tax reform package on October 17, 2013. The key amendments to the package, which was presented to the House by the Executive Branch (as described in our September 9, 2013 newsalert), include deferring imposition of a 16% VAT on temporary imports, modifying the non-deductibility rule for payments to related parties abroad by eliminating the 75% of the Mexican corporate income tax rate test, modifying the tax consolidation exit procedure, and increasing the highest individual tax rate bracket.

With the House approval, major tax reform in Mexico is now one step closer to enactment. The tax package, if enacted, will usher in dramatic tax changes for multinationals operating in Mexico. For example, the new provisions potentially limiting deductions for technical assistance, interest and royalties, as well as the elimination of the tax consolidation regime and higher requirements for maquila benefits all have the potential for significant impact.

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