Domestic Maquila conversions with lack of substance under scrutiny…

Important changes in Mexico - driven by President Enrique Peña Nieto’s administration - are occurring through the country: In addition to measures proposed in the tax bill presented last September 8th the new head of the Large Taxpayer section of the SAT (Oscar Molina) announced that Mexican authorities have started taking actions on Base Erosion and Profit Shifting (BEPS) under a pre-defined action plan, through which they intend to apply anti-avoidance measures in respect of certain business restructurings, particularly concerning supply chain conversions (better known in Mexico as maquila conversions).

The target of such action plan is MNEs that have restructured to conduct manufacturing and distribution operations in Mexico, while potentially off-shoring intangible assets or to shift profits away from the country.

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