Mexico has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”) on 7th June 2017. The signing of the MLI will modify over 1,100 international treaties by more than 68 countries aimed to avoid double taxation and tax evasion, including those treaties previously signed by Mexico. The Convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide. The OECD’s goal is to lessen tax avoidance by Multinational Groups emerged from forceful International Tax and Transfer Pricing positions, which, as per OECD estimations, ranges from 100 to 240 billion dollars every year.
The signing of the MLI effectively concludes the objective put forward by Action 15 of the BEPS Plan, and is without a doubt a watershed moment relating to International Tax. It is accordingly fundamental for Multinational Groups to assess the adequacy of their Transfer Pricing and International Tax policies to the new worldwide condition.
On February 28 2017, a general rule was published in the Official Gazette. This rule govern Mexico’s R&D (research and development) tax credit. The incentive for the tax credit was resumed within the scope of the tax reform of 2017. Taxpayers may claim a credit against the income tax liability equal to 30% of the investments and expenses for technological R&D in Mexico and is attributable to the income tax due for the respective fiscal year (FY). Taxpayers calculate the credit based on the incremental expenses and investments made in the current year as compared to the previous three tax years. Taxpayers have to submit their applications between 1 April and 31 May for fiscal year 2017.
In addition to R & D credits, the tax package provides tax incentives in the form of tax credits for investments or contributions to projects in areas such as fees of external researchers, technical training, specialized lab equipment, the performing arts, highly specialized sports and high-performance athletics and public charging stations for electric vehicles. As the rules for the R & D credit, the tax package requires the establishment of a committee to determine the types of expenses that qualify for tax credits.
Mexico’s Taxpayer Office published a final report regarding master file, local file and country-by-country (CbC) report under Article 76-A of the Income Tax Law on April 3, 2017. These documentation requirements became effective on January 1, 2016, with introductory CbC reports due by December 31, 2017 for the 2016 assessment year.
As a result of the public consultation, multinational companies, and other organizations issued comments regarding 13 key points of reporting which were modified by the Mexican tax authorities:
1) Local File: Replaces Local transfer pricing documentation requirements of Article 76 fractions IX and XII of the MITL.
2) Local declaration: With regard to the Local declaration, the elimination in all cases of the requirement to file financial statements and tax returns of parties.
3) CbC Report: With regard to the Country-by-Country declaration, it was possible for business groups do not have to present several declarations of this kind, but can file one report for the group.
4) Master file: Regarding the Master file, it was possible to recognize the validity for tax purposes statements made by a foreign parent with a Mexico, when the requirements established in Action 13 of the Plan of Action BEPS.
5) Master file: Regarding the Master file, only five types of products or services representing more than 5% of the total income of the group.
6) Master file: The meaning of concepts such as multinational business group, business restructuring, intangible assets and policies of Transfer Pricing restructuring.
7) Master and local file: Regarding the Master and Local file, it was possible to recognize the validity of the English language for the master file as well as for intercompany agreements and business clarification of comparable in local file.
8) Local file: Possible description of intercompany transactions.
9) Master file and CbC report: Can be presented in foreign currency.
10) Local file: Analysis included in the Local File provides the elements to initiate that intercompany transactions are in accordance with the arm’s-length principle.
11) Local file: As for the Local file, only the list of Advance Transfer Pricing Agreements of the group, but that the taxpayer only provide copies of those in their possession.
12) Master file: As for the Master file, it was possible to enable the delivery of the same by line of business.
13) Master file: With regard to the Master file, there was a possibility that all entities subject to filing master file must file only one document for the group.
Hong Kong signs agreements on automatic exchange of financial account information in tax matters with 6 jurisdictions
Hong Kong has signed agreements with six jurisdictions for conducting automatic exchange of financial account information on tax matters. They are Belgium, Canada, Guernsey, Italy, Mexico and the Netherlands.
A Government spokesman said on 17 March 2017 that they have been seeking to expand Hong Kong’s AEOI network with their tax treaty partners. The signing of agreements with six more jurisdictions, bringing up the number of Hong Kong’s AEOI partners to a total of nine (including Japan, Korea and the United Kingdom), signifies the Government’s efforts in this drive
The Government will put the six places on the list of “reportable jurisdictions” under the Inland Revenue Ordinance.
The tax administration (Servicio de Administración Tributaria) of Mexico has been issued guidance regarding tax matters in January 2017. The guidelines set standards for compliance with the rule for electronic or digitized tax revenues. A tax receipt is important for particular business activities and taxpayers require issuing tax receipts for certain companies. The guidance contain information about: Digital tax receipt online and digital tax receipt provided via the internet.
Annex 16 to the Miscellaneous Tax Resolution for 2017 has been published in the Official Gazette on 16th January 2017. This Resolution contains the guidelines to complete and present the Statutory Tax Audit Report of 2016.
Annex 15 to the Miscellaneous Tax Resolution for 2017 has been published in the Official Gazette on 12th January 2017 regarding new automobile tax tariffs for 2017.