On July 11, 2018 the Mexican Tax Authority (SAT) has published amendments to the rules for transfer pricing adjustments now included in rules 3.9.1.1-3.9.1.5 of Resolución Miscelánea Fiscal (RMF).
These rules include the definition of transfer pricing adjustments, the types of adjustment and additional requirements for adjustments to revenue and deductions. The new rules should provide greater clarity and security to taxpayers in Mexico but need more supporting documentation. According to the regulations, taxpayers who receive income, from an adjustment increase, shall consider as nominal income for the monthly provisional payments for which the adjustment is made, the amount received or profit margins on operations conducted between related parties, when such changes are made in order to set such transactions as arm’s length.
Supporting documentation:
If making any transfer pricing adjustment, taxpayers must need to consider the following issues:
- File a regular or amended tax return specifying the adjustment and keep all supporting documentation on file;
- Obtain a documentary containing an affidavit signed by the expert and explain the reason for this adjustment;
- Keep documentation explaining the lack of consistency in the methodology used; Keep the mathematical calculations that underlie the adjustment;
- The obligation to keep the digital tax bill (“CFDI”, in the Spanish abbreviation) and to issue tax invoices that meet the tax requirements for the adjusted transactions and the invoices reflecting the adjustment; and
- Evidence that the counterparty to the controlled transaction increased the income or reduced the deduction in the same tax year as evidenced by the affidavit issued by the legal representative of that counterparty.
Timing and deadlines: According to the regulations, taxpayers are allowed to conduct “voluntary or compensatory” adjustment deductions only for the taxable year in which the income or deductions were originally incurred from the controlled transactions.
Furthermore, the regulations state that the “voluntary or compensatory” adjustments shall be reflected in the tax returns or in the accounting audit report, no later than: March 31 of each year for taxpayers who have not elected the option contained within Article 32-A of the Federal Fiscal Code; or June 30 each year for taxpayers who elect to take the option contained within Article 32-A of the Federal Fiscal Code (subject to conditions). In cases where taxpayers conduct a voluntary or compensatory adjustment after the aforementioned deadlines, they will be allowed to deduct the adjustment in the taxable year in which they recognized as income or deduction the relevant controlled transaction, subject to submitting Form 130/ISR. Likewise, when taxpayers conduct a national correlative adjustment as a consequence of a primary adjustment, they will be allowed to deduct it by submitting Form 134/ISR.
Finally, taxpayers are allowed to request an adjustment deduction derived from APA’s or tax treaty’s correlative adjustment, with different deadlines to the ones mentioned above. In no case may the delayed submission go beyond the term permitted by the APA rules.
