Recently, the Mexican tax authorities issued the Second Resolution of modifications to the 2018 Miscellaneous Tax Resolution (MTR) in which the rules regarding transfer pricing adjustments were amended and certain additional provisions were included. The amendments affect transfer pricing Rules 3.9.1.1, 3.9.1.2, 3.9.1.3, and 3.9.1.4, which have been in force since tax year 2017, and add new Rule 3.9.1.5, which applies to transfer pricing adjustments as of 12 July 2018.
Transfer pricing adjustments
- Rule 3.9.1.1 establishes that when transfer pricing adjustments have effects in the tax and accounting fields, they are considered as real adjustments and when such adjustments have effects only in the tax field (cashless), they are considered as virtual adjustments.
- Furthermore, the new miscellaneous tax rule 3.9.1.1 includes five different categories for transfer pricing adjustments, which are as follows: voluntary or compensatory adjustment; primary adjustment; domestic correlative adjustment; foreign correlative adjustment; and secondary adjustment. It is the first time secondary adjustments are incorporated into the Mexican tax provisions.
Timing of adjustments
- Under rule 3.9.1.3 transfer pricing adjustments which increase authorized deductions should be applied no later than the date of the filing of the annual tax return, that is, March 31; or June 30 or July 15 for taxpayers that are obliged to file the tax situation informative return or that opted to file the annual tax report (dictamen fiscal), respectively.
- In this regard, the new miscellaneous tax rule 3.9.1.4 establishes that taxpayers who perform a voluntary or compensatory transfer pricing adjustment after the above mentioned dates, may deduct it in the fiscal year in which the income or deductions were originally recognized, provided that they submit a notice to the Mexican tax authorities complying with the requirements established therein.
- On the other hand, rule 3.9.1.5 establishes that taxpayers may request that the deduction of transfer pricing adjustments in a different fiscal year to the one in which the income or deductions derived from the operations with related parties that originated them were recognized, provided that it is derived from an advanced pricing agreement (APA) and the tax years are covered by such APA.
