On September 8, 2015, the Executive branch submitted a tax bill to the Mexican Congress which contains several amendments to the federal tax laws currently in force. If approved, the proposed amendments would apply in 2016.

The proposed bill for tax year 2016 will be subject to discussion and approval by the Mexican Congress and thus the information contained herein may be subject to change.

Some of the most important modifications that are being proposed are the following:

Income tax

Mexican residents

It is proposed:

  • To eliminate the generality principle applicable to social welfare benefits given to non-union workers, as well as to eliminate the specific limits to deduct such benefits.
  • To exclude from the thin capitalization computation the debts incurred in connection with the investment in infrastructure related to electric power generation.
  • To include the obligation of filing new informative tax returns of related parties: i) master informative return of the business multinational group; ii) local informative return of related parties; and iii) country by country informative return of the business multinational group. This new rule would apply to those taxpayers that are required to file an informative return regarding their tax situation, except for those legal entities resident in Mexico that are required to file such informative return as a consequence of the transactions carried out with foreign residents.
  • That those taxpayers engaged exclusively in the generation of energy from renewable sources or cogeneration systems of efficient electricity, would be entitled to maintain a profit account for investments on energy sources, instead of the net after tax profit account (CUFIN). The additional tax on dividends would not apply for those dividends that are distributed from the profit account for investments on energy sources.
  • To allow for tax years 2016 and 2017 (and for the last quarter of 2015) the accelerated deduction of investments for: i) individuals and legal entities whose income does not exceed 50 million pesos; ii) taxpayers that carry out investments in construction and expansion of infrastructure, such as roads, highways and bridges; and iii) taxpayers that invest in activities regulated by the Hydrocarbons Law (except for superficial reconnaissance and exploration, and exploration and extraction of hydrocarbons) and in equipment for the generation, transportation, distribution and supply of energy.
  • To eliminate the requirement applicable to trusts for investment in venture capital (FICAPs) that implies that their maximum duration must be of 10 years.
  • To establish for legal entities (as well as for individuals) a temporary procedure to repatriate offshore investments held until December 31, 2014 for which income was generated, including that from tax havens. This program would not grant discounts on the income tax rate to be paid (except for surcharges and penalties, as the case may be), but would allow to consider the corresponding formal obligations as complied.
  • To incorporate several rules with the purpose of accelerating and simplifying the exit process from the tax consolidation regime.
  • To include once again the tax incentive for legal entities consisting in decreasing from the tax profit determined for purposes of income tax advanced payments, the amount of the employee's participation in the company profits paid in the same tax year.

Mexican-source income of non-residents

It is proposed that the 4.9% withholding tax rate applicable to interest paid to foreign banks (including investment banks) would be valid for 2016, to the extent that the beneficial owner of the interest is resident in a country with which Mexico has in force a treaty to avoid double taxation and the requirements established in the treaty to apply the rate established therein for such type of interest are met.

Special tax on production and services

It is proposed that exports made by producers of non-basic food with high caloric density are taxed by the special tax on production and services at a 0% rate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.