Mexican Informative Tax Returns of Transactions with Related Parties carried on during 2016 to report before December 31, 2017

December 19th, 2017.

As part of the updates made by the Mexican tax authority SAT – Tax Administration Service to comply with the Action Plan against the Base Erosion and Profit Shifting “BEPS” issued by the Organization for Economic Co-operation and Development OECD, on November 1st. 2017, this entity together with the Attorney’s Office of the Taxpayer’s Advocacy “PRODECON” have issued the official platform and digital formats for the submission of the three new Transfer Pricing informative returns called Local, Master and Country-by-Country.

Dear Clients and Friends,

As part of the updates made by the Mexican tax authority SAT – Tax Administration Service to comply with the Action Plan against the Base Erosion and Profit Shifting “BEPS” issued by the Organization for Economic Co-operation and Development OECD, on November 1st. 2017, this entity together with the Attorney’s Office of the Taxpayer’s Advocacy “PRODECON” have issued the official platform and digital formats for the submission of the three new Transfer Pricing informative returns called Local, Master and Country-by-Country.

Through these formats, taxpayers who are within the assumptions following mentioned will have to comply before December 31st, 2017 with such new liability in relation to their transactions with related parties (Article 32-H –I, II and III Fiscal Federal Code CFF and Article 76-A of Income Tax Law LISR):

• Taxpayers (companies) located in the general regime of LISR with income in the previous year higher than $ 644’599,005,000 Mexican Pesos MxP ($33’926,300 dollars approximately); or who has had placed shares on the stock market; or no other of the following assumptions be applicable to said taxpayers
• Taxpayers (companies) who pertain to the optional tax regime for groups of companies (known in the past as tax consolidation regime)
• Parastatal Entities of the Federal Public Administration
• Taxpayers (companies) abroad residents with a permanent establishment in Mexico, with respect the activities carried out through said office

In regards the obligation of filing of the Country-by-Country return, it is important to have in mind that only taxpayers with certain characteristics are obligated to it, being the most relevant the amount of income. In case of income in the previous year equal or higher than $12’000,000,000 MxP ($631’578,950 dollars approximately) said obligation will be applicable.

In order to provide the necessary support and information for the correct and timely completion of the aforementioned returns, it is essential that taxpayers get to be done the corresponding Transfer Pricing Study to cover each of the transactions made during 2016 with their related parties (Article 76-IX and XII, and Article 179 of LISR).

It should be noted that in case of failure to timely submit the cited returns, those taxpayers could be subject to the following sanctions (Articles 81- XL, and 82- XXXVII CFF):

1. Fine that runs from $140,540 to $ 200,090 MXP ($7,400 to $10,530 dollars approximately) for taxpayers who omit to provide the returns with the information requested or provide it incomplete, with errors and/or inconsistencies in form.

2. Inability to contract with the Federal Public Administration on acquisitions, leases, services or public projects.

3. Inability to obtain a taxpayer accomplishment tax certification.

4. Cancelling of import registration.

At Moore Stephens Orozco Medina we have specialists in Transfer Pricing and a team of tax counselors and accountants who can provide the support that your company requires in compliance with this new tax obligation.