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Taxpayers must weigh the risks that can result from non-compliance with the Mexican transfer pricing income tax regulations reporting requirements.

Mexico Update: What You Need to Know About the March Tax Compliance Deadline

March is a critical month for many taxpayers who reside in Mexico as they have to comply with various tax obligations such as the Annual Tax Return and other information related to a company's intercompany transactions conducted with related parties resident abroad.

Pursuant to Article 76, Section X of the Income Tax Regulations, taxpayers who carry out transactions with related parties residing abroad are required to submit, together with the Annual Tax Return, information on operations carried out during the previous calendar year. They would submit this information on Form 30, the Multiple Information Statement, in Annex 9 labeled "Information on Operations with Related Parties Residing Abroad."

The deadline for submitting this information to the Mexican Tax Administration Service is March 31, since it should be submitted on a contemporary basis with the submission of the Annual Tax Return. The consequences of not complying with this obligation are, mainly, the following:

  • In the event that taxpayers do not have a transfer pricing documentation study in place, which has been prepared in accordance with Article 76, Section X, the authorities may consider intercompany payments made abroad as non-deductible.
  • In the event that ataxpayer fails to present the required information on intercompany transactions with related parties residing abroad or submit it with errors, the taxpayer may be charged with a fine that can range between $70,000 and $140,000 under Articles 81, Section XVII and 82, Section XVII of the Mexican Income Tax Regulations.

Therefore, it is advisable for taxpayers to weigh the economic and financial risks that can result from non-compliance with the Mexican transfer pricing reporting requirements.  In addition to the fine that may be imposed, an in-depth review by the Mexican tax authorities can be time- and resource-intensive for a company.

Henric Adey is the Transfer Pricing Practice Leader at EisnerAmper. As practice leader, he is responsible for advising clients over a wide span of industries concerning both international and multi-state transfer pricing matters.

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