Transfer pricing in Mexico

Transfer pricing in Mexico at a glance

Regulation Type National regulations
Are there specific transfer pricing regulations? Yes
Submission deadline March 31 of following fiscal year
Submission deadline upon request 15 business days
Annual update required Yes
Official language requirements Spanish
Potential impact of penalties N/A

 

Mexican tax law

Rules for transfer pricing in Mexico are based upon:

  • Federal Fiscal Code Articles 86-XII, XIII and XV, 106, 215, 216, and 217
  • Regulations of The Income Tax Law Article 18 — III

OECD

Rules for transfer pricing in Mexico are generally in line with the OECD Transfer Pricing Guidelines. However, if the Guidelines contradict with the national regulations, national regulations prevail.

Methods

Accepted methods

Accepted methods are:

  • The comparable uncontrolled price (CUP) method
  • The resale price method
  • The cost-plus method
  • The profit split method
  • The transactional operating profit margin method (TOPMM)

Priority of methods

Rules for transfer pricing in Mexico show the CUP method as the preferred method, followed
by the cost plus and resale price methods. Profit-based methods are to be applied if the CUP, cost-plus, and resale price methods are not applicable. The profit split and the residual profit split methods, and TOPMM, are not applicable in specific circumstances.

Documentation requirements

Information that should be included in the documentation:

  • Name, address and tax residency of the non-resident related persons with whom transactions are carried out
  • Information regarding functions performed, assets used and risks borne by the taxpayer involved in each transaction
  • Information that shows that prices with each domestic and foreign related party set on a transaction-by-transaction basis are at arm’s length 

Language 

Rules for transfer pricing in Mexico prescribe that all documentation should be submitted in Spanish. 

Requirements to prepare documentation annually

In Mexico the documentation should be updated annually. This means that a complete new transfer pricing study is required each year.

Submission deadline upon request by tax authorities

Upon request of the tax authorities a taxpayer has 15 business days to submit it’s documentation. This period can be extended with an additional 10 business days.

Advance Pricing Agreements

General

In Mexico it is possible to obtain unilateral and bilateral Advance Pricing Agreements (APA).

Terms 

Generally an APA can be agreed upon for a period of three years forward and one year back. However, these terms are negotiable.

Penalties

Rules for transfer pricing in Mexico do not include specific transfer pricing penalties, meaning that ordinary tax penalties apply.

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