Mexico s Reportable Transactions Rules in Effect January 1 Monday, December 21, 2020
Beginning January 1, 2021, Mexico’s reportable transaction rules require either a taxpayer or a tax advisor to report to the Mexican tax authorities any transactions that are designed, marketed, organized, implemented or administered to provide a tax benefit to the taxpayer.
What is a Reportable Transaction?
A reportable transaction is considered to be any transaction that generates or may generate, directly or indirectly, a tax benefit in Mexico and has any of the following characteristics:
Prevents foreign authorities from exchanging tax or financial information with Mexican tax authorities.
Avoids the application of the preferential tax regime (“REFIPRE”) or of transparent tax entities and foreign instruments.
OVERVIEW
Beginning January 1, 2021, Mexico’s reportable transaction rules require either a taxpayer or a tax advisor to report to the Mexican tax authorities any transactions that are designed, marketed, organized, implemented or administered to provide a tax benefit to the taxpayer.
IN DEPTH
What is a Reportable Transaction?
A reportable transaction is considered to be any transaction that generates or may generate, directly or indirectly, a tax benefit in Mexico and has any of the following characteristics:
Prevents foreign authorities from exchanging tax or financial information with Mexican tax authorities.
Avoids the application of the preferential tax regime (“REFIPRE”) or of transparent tax entities and foreign instruments.
The OECD published specific guidance on financial transactions in February 2020
Excessive debt financing has always been on the eye of tax authorities in order to protect their tax base. This is because multinational enterprises (MNEs) have the option to finance their activities with debt or equity each being subject to different tax treatment, and as a result, from a tax perspective, debt financing is considered more advantageous as opposed to equity.
Nevertheless, countries have introduced certain anti-avoidance provisions in order to disallow excessive interest deductions being claimed and therefore making MNEs pay their ‘fair of share of tax’. In doing so, a country may adopt any of the three commonly seen approaches:
CAPE VERDE: Decree-Law on binding rulings published
Cape Verde s Ministry of Finance published
Decree-Law 74/2020 in the Official Gazette on 12 October 2020,
setting out the conditions for taxpayers requesting binding tax
information rulings. The Decree Law became effective on the same
day.
Once the application is submitted, the tax administration is
obliged to respond and notify the applicant within a maximum of 75
days. However, an urgent response within 45 days may be provided
for justified requests, provided that the request is accompanied by
a legal-tax framework proposal. The tax authority must notify an
applicant within 30 days on whether a request is accepted as