The Mexican tax authorities recently announced that they will begin addressing certain issues identified in the OECD’s Base Erosion and Profit Shifting (BEPS) report. This is part of a previously-defined action plan in accordance with which the tax authorities intend to apply anti-avoidance measures with respect to certain business restructurings, particularly those involving supply or value chain conversions that utilize the existing maquiladora regime.
The tax authorities’ action plan targets multinationals that have restructured their Mexican manufacturing and distribution operations by migrating intangible property (IP) and related profits away from Mexico. In line with the above, the authorities have noted that over 700 BEPS targets have already been identified for audit, and that 270 of these targets have converted from full-risk operating companies to limited-risk structures involving maquiladoras with high levels of domestic production and sales in the domestic market. The tax authorities have stated that their goal is to capture the appropriate amounts of profits on their domestic sales.