On 2 March 2021, a publicly traded Canadian mining company (First Majestic Silver), has resorted to international arbitration to resolve an ongoing transfer pricing dispute with the Mexican government over tax reassessments the government made in conflict with the terms of an advance pricing agreement (APA).
The APA, which covered 2010–2014, specified that taxes payable under the streaming agreement would be calculated based on actual revenue realized rather than market prices. In acquiring Primero, First Majestic assumed the obligations under the streaming agreement covered by the APA.
Notwithstanding the APA, the Mexican government issued tax reassessments based on market prices for 2010–2012. The assessments amount to approximately US $260 million and include US $75 million in additional taxes, as well as penalties, interest, and denied intercompany interest expenses. The Mexican government subsequently issued another reassessment for 2013 equaling approximately US $132 million.
After failing to negotiate a solution with the Mexican government, First Majestic has now filed for arbitration under the North American Free Trade Agreement (NAFTA) with the World Bank’s International Center for the Settlement of Investment Disputes (ICSID).
