Mexico published the tax reform package for 2016 including amended Federal Tax Code and Income Tax Law in the Official Gazette on 18 November 2015. The tax reform will be applicable from 1 January 2016.According to the tax reform package the main provisions are given below:
Under the Action Plan on Base Erosion and Profit Shifting (BEPS), new information return for transfer pricing required to be developed specifically required to: a Master File, a Local File and a Country-by-Country Report (applicable if earning is at least EUR 750 million yearly).
The tax reform package an instant deduction will be offered for new fixed asset investments in the energy, infrastructure and transportation sectors of 2016 and 2017, if the income up to MXN 100 million. Withholding tax rate of 4.9% will be applicable on interest paid to non-resident banks, when the beneficial owner of the interest and is resident in a country with which Mexico has a tax treaty in force.
Exclusion of the application of thin capitalization rules to debts incurred in relation to investments for the generation of electricity.
In accordance with tax reform package an incentive includes waiving of penalties and surcharges and granting of tax credits in view of tax payments from abroad may apply and it is applicable for both entities and individuals repatriating capital (including capital located in low-tax jurisdictions) under given conditions are satisfied.
Incentives are available for individual shareholders for reinvesting the profits derived between 2014 and 2016 and 10% additional withholding tax will be applied to dividends and calculated as below:
- 1% on distributed dividends in 2017
- 2% on distributed dividends in 2018
- 5% on distributed dividends as of 2019.
