MLI enters into effect on January 1, 2024 for Mexico

March 2023

In brief

Mexico deposited the instrument of ratification for the Multilateral Instrument (MLI) with the OECD on March 15, 2023. The Mexican Senate had approved the MLI on October 12, 2022, and completed its legislative ratification process on November 22, 2022, with its publication in the Official Gazette. See our previous PwC Insight. The MLI will enter in to force on July 1, 2023, and will be effective for all Mexican tax purposes on January 1, 2024.  

Takeaway: Taxpayers should consider the potential impact of the MLI if they are currently, or anticipate, relying on benefits under Mexico’s income tax treaty network. 


The OECD developed the MLI to amend bilateral treaties swiftly and implement the tax treaty measures developed in the course of the OECD BEPS Action Plan. The MLI contains provisions that modify certain existing tax treaties and potentially disallow benefits that would otherwise be available. Importantly, existing tax treaties are only modified once both parties to the tax treaty have ratified, and the instrument of ratification has been deposited with the OECD. 

Mexico’s signature 

Mexico is one of the original MLI Signatories and participated in the signing ceremony on July 7, 2017. As such, Mexico has undertaken to adopt the measures introduced by the MLI, opting to cover all of its tax treaties, regardless of their status. Pursuant to the MLI’s applicable provisions, once two Contracting Jurisdictions have mutually covered each other, such treaty becomes a ‘Covered Tax Agreement’ (CTA) and the Contracting Jurisdictions become a Signatory thereof.  

The MLI provides countries with flexibility in meeting BEPS minimum standards, choosing provisions, and adopting provisions at a later time. However, the MLI includes several ‘minimum standards.’ These include Article 6 - Purpose of a Covered Tax Agreement and Article 7 - Prevention of Treaty Abuse, both derived from BEPS Action 6 (Preventing the Granting of Treaty Benefits in Inappropriate Circumstances). For the most part, these provisions will, for the most part, introduce modifications to the treaty preamble as well as the ‘principal purpose test’ provision.  

All provisions of the CTA regarding both withholding taxes on Mexican-source income (i.e., interest, royalties, dividends), as well as taxes levied by Mexico where no withholding applies (i.e., capital gains, permanent establishments), with parties that already have ratified and deposited the instrument will be affected by the MLI as of January 1, 2024.

Observation: All taxpayers doing business in Mexico, whether Mexican taxpayers or multinationals with Mexican-sourced income, should evaluate the potential impacts on their existing operations and structures. Such impacts could be felt as early as next fiscal year given the enforcement of the MLI provisions and the application of a tax treaty between Mexico and the Signatory party, considering the elections made by Mexico and the other jurisdiction. Moreover, for accounting purposes, any Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 740-10-50, Income Taxes—Overall—Disclosure (or other applicable accounting standards in other jurisdictions) also must be evaluated on a case-by-case basis. 

Out of the expected 55 CTAs for Mexico, 48 already have been ratified and deposited. Therefore, they will be covered by the MLI effective January 1, 2024. Treaties with Argentina, Colombia, Italy, Jamaica, Kuwait, Peru, and Turkey have not yet finished the MLI ratification and deposit procedure.   

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Ken Kuykendall

Ken Kuykendall

US Tax Leader and Tax Consulting Leader, PwC US

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