Tax deferral of foreign exchange gains in Mexico may be possible

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March 2016

Overview

The Mexican Peso has lost significant value against major foreign currencies since late 2015. Mexican taxpayers with monetary assets denominated in foreign currencies must determine foreign exchange (FX) gains or losses, which are taxable for Mexican income tax purposes at the end of each tax year on an accrual basis.  Devaluation of the Peso thus results in income tax volatility — Mexican entities may incur significant tax losses or taxable income due to the change in value of the Mexican Peso from January 1 to December 31 of each calendar year.

Based on the new regulations under the Mexican Income Tax Law (MITL-R), effective October 9, 2015, taxpayers may be able to defer taxation of foreign exchange gains until they are realized, instead of on an accrual basis.

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Tim Anson

ITS Partner, PwC US

Michael Urse

Partner, International Tax Services, PwC US

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