1. A. Transfer pricing documentation requirements
    1. Are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?
    2.  What is the content of the documentation that must be prepared?
    3. Which transactions need to be documented – all transactions with affiliated companies, or only those exceeding a certain threshold?
    4. What is the definition of “associated enterprises” for this obligation – in particular, do transactions between a branch and its head office fall within the scope of the documentation obligation?
    5. For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on TP documentation for associated enterprises (“EU CCTP”) If not, are taxpayers entitled to choose between the local requirements and the EU TPD?
    6. For all countries (and, in particular, OECD countries), is the content of the documentation similar to that described in the revisions to Chapter V of the OECD TP Guidelines (final report on Action 13 of the BEPS project)? If not, are taxpayers entitled to choose between local requirements and the OECD approach?
    7. Are taxpayers not established in your jurisdiction obligated to provide specific information upon request? Can your tax authorities require a taxpayer within your jurisdiction to provide information located in another state?
    8. If comparable studies are to be provided, do tax authorities generally accept regional reference studies (e.g. pan-European reference studies)?
    9. If comparable studies are to be provided in general, are there specific safeguards/circumstances in your jurisdiction that exempt taxpayers from preparing comparative studies (such as the EU Joint Transfer Pricing Forum Guidelines on low value-adding services or revisions to Chapter VII of the OECD TP Guidelines on low value-adding intragroup services) or are there situations where tax authorities do not request comparative studies? If so, under what circumstances are taxpayers exempted from comparative studies?
    10. What language(s) should taxpayers use when submitting TP documentation?
    11. What is the deadline or timescale for providing TP documentation to the tax authorities - is it to be provided, for example, upon filing of the tax returns, at the beginning of a tax audit or on the specific request of the tax authorities?
    12.  In the event that the documentation is not provided within the applicable timescale or is incomplete, do documentation-related penalties apply? If so, please detail the penalties and the circumstances in which they do and do not apply.
    13.  Does the absence or incompleteness of documentation reverse the burden of proof as regards the arm’s length character of the transactions?
    14.  In the event that the tax authorities (i) impose documentation-related penalties and (ii) make a transfer pricing reassessment, does the imposition of documentation- related penalties prevent the taxpayer from initiating any mutual agreement procedure which may be contained in an applicable tax treaty (or, for EU countries, the procedure contained in the EU Arbitration Convention) with a view to eliminating any double taxation resulting from the transfer pricing reassessment?
    15. Any other relevant aspect not addressed above?
  2. B. Country-by-Country reporting ("CbCR")
    1.  Has the obligation to file a CbCR been implemented? If not, is the introduction of the CbCR being considered, and if so, when?
    2.  If the obligation to file a CbCR is in force, what is the tax year from which this obligation applies and what is the deadline for filing the CbCR?
    3.  Which taxpayers are required to file a CbCR under the applicable laws?
    4. Is the content of the CbCR fully in line with the OECD model (final report on Action 13 of the BEPS project)? If not, what are the differences?
    5. What is the penalty for failing to file the CbCR on time? Can local subsidiaries of a foreign group suffer the local penalty if the foreign group has not filed the CbCR?
    6. Are there tax treaties in force allowing the communication of CbCR with other jurisdictions?
    7. Any other relevant aspect not addressed above?
  3. C. As the case may be, other documentation / filing requirement in relation to transfer pricing?
    1. Are there any other documentation/filing requirements in relation to TP?
    2. If so, what is the content of such documentation / filing requirement? What language(s) are to be used by taxpayers?
    3. What is the deadline for meeting this documentation / filing requirement?
    4.  Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?
    5. What is the penalty for failing to meet this requirement on time?
    6.  Any other relevant aspect not addressed above?

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Mexico
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A. Transfer pricing documentation requirements

1. Are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

Mexican taxpayers entering into transactions with any related parties (foreign or domestic) are always required to demonstrate that the amounts of their income and deductions were determined with the prices or amounts of consideration that would have been used by independent parties in comparable transactions 1 , i.e. under the arm’s length principle.

Mexican taxpayers are required to prepare and keep a transfer pricing study only if their income in the immediately preceding fiscal year exceeded:

  • MXN 13,000,000 (approximately EUR 650,000) if conducting business activities, or
  • MXN 3,000,000 (approximately EUR 150,000) if rendering professional services.

These thresholds are not applicable, and taxpayers are always required to prepare and keep a TP study when they:

  • enter into transactions with low tax regimes residents (under 75% of the Mexican income tax), or
  • are hydrocarbons contractors or assignees.

2. What is the content of the documentation that must be prepared?

TP documentation shall contain the following information:

  • names, addresses and tax residencies of the related parties with whom they enter into transactions, as well as documentation demonstrating direct and indirect interests among the related parties
  • information of the functions or activities performed by, assets used by, and risks assumed by, the parties for each type of transaction (i.e. functional analysis)
  • information and documentation on related party transactions and amounts thereof, for each related party and for each type of transaction
  • TP method used (e.g. Comparable Uncontrolled Price Method, Resale Price method, Cost Plus Method).

2.1 Which transactions need to be documented – all transactions with affiliated companies, or only those exceeding a certain threshold?

When a Mexican taxpayer is required to prepare and keep a TP study, all transactions with related parties need to be documented.

2.2 What is the definition of “associated enterprises” for this obligation – in particular, do transactions between a branch and its head office fall within the scope of the documentation obligation?

In terms of Mexican legislation, two or more entities are deemed as related parties (i.e. associated enterprises) when one participates directly or indirectly in the administration, control or equity of said entity or when a person or group of persons participates directly or indirectly in the administration, control or capital of such entities 2 . Members of partnerships are considered to be related, as are persons who are deemed related parties of said members.

Head office and branches (i.e. permanent establishments or “PEs”) thereof are deemed related parties of Mexican branches, as are persons indicated in the preceding paragraph and the PE thereof.

2.3 For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on TP documentation for associated enterprises (“EU CCTP”) If not, are taxpayers entitled to choose between the local requirements and the EU TPD?

N/A

2.4 For all countries (and, in particular, OECD countries), is the content of the documentation similar to that described in the revisions to Chapter V of the OECD TP Guidelines (final report on Action 13 of the BEPS project)? If not, are taxpayers entitled to choose between local requirements and the OECD approach?

Yes, the content outlined in Mexico’s tax legislation – including the Income Tax Law (ITL), Federal Tax Code (FTC) and Omnibus Tax Resolution (OTR) – basically aligns with the provisions found in Chapter V of the OECD TP Guidelines 3 .

2.5 Are taxpayers not established in your jurisdiction obligated to provide specific information upon request? Can your tax authorities require a taxpayer within your jurisdiction to provide information located in another state?

The Mexican tax authorities may exercise their audit powers concerning the obligations of Mexican taxpayers regarding transactions with related parties. The Mexican tax authorities may request information from foreign tax authorities only regarding a Mexican taxpayer’s compliance with its obligations with respect to transactions carried out with them 4  or a foreign resident’s Mexican-sourced income.

In addition, the tax authorities may request reports, data or documents from jointly and severally liable parties in connection with Mexican taxes (e.g. related parties are jointly and severally liable in terms of FTC 5 ) 6 .

2.6 If comparable studies are to be provided, do tax authorities generally accept regional reference studies (e.g. pan-European reference studies)?

The Mexican tax authorities do not accept regional reference studies and require that each transaction is documented under the requirements previously referred to.

2.7 If comparable studies are to be provided in general, are there specific safeguards/circumstances in your jurisdiction that exempt taxpayers from preparing comparative studies (such as the EU Joint Transfer Pricing Forum Guidelines on low value-adding services or revisions to Chapter VII of the OECD TP Guidelines on low value-adding intragroup services) or are there situations where tax authorities do not request comparative studies? If so, under what circumstances are taxpayers exempted from comparative studies?

Mexican tax legislation does not establish specific safeguards/circumstances that exempt taxpayers from preparing comparative studies.

2.8 What language(s) should taxpayers use when submitting TP documentation?

In general, TP documentation must be filed in Spanish before the Mexican tax authorities.

Mexican tax legislation provides some specific exceptions where the information may be presented in English (e.g. in the Local File, certain information may be submitted in English, such as contracts they have celebrated with their related parties, or information related to the business description of companies considered comparable 7 ; also in the Master File, Mexican tax regulations establish that information may be filed in English 8 ).

3. What is the deadline or timescale for providing TP documentation to the tax authorities - is it to be provided, for example, upon filing of the tax returns, at the beginning of a tax audit or on the specific request of the tax authorities?

The Multiple Informative Tax Return (“DIM” for its acronym in Spanish) should be filed annually by 15 May of the immediate next fiscal year. 9  The DIM contains information regarding the TP study such as:

  • general information of the related party
  • information of the transaction
  • information used to determine arm’s length margins or considerations
  • TP analysis method used and results.

TP studies and supporting documentation shall only be provided upon tax authority request.

Mexican tax legislation imposes a fine ranging from MXN 99,590-199,190 (approximately EUR 4,980-9,960) for individuals who fail to submit a DIM on transactions conducted with foreign-resident related parties during the immediately preceding calendar year, or filing the Local File incomplete or with errors by the designated deadline 10 .

In addition, ITL 11  requires compliance with TP obligations for the deduction of related expenses and investments. As a result, apart from fines, there is a risk of disallowance of deductions for transactions with related parties if failing to submit the relevant DIM.

5. Does the absence or incompleteness of documentation reverse the burden of proof as regards the arm’s length character of the transactions?

Yes, the burden of proof regarding the arm’s length nature of transactions reverses due to the absence of information or incomplete documentation.

Mexican legislation does not provide any limitation for initiating any friendly procedure to eliminate any double taxation due to lack of documentation. However, it would be important to review the specific context of each case and its applicable international treaty regarding this matter.

7. Any other relevant aspect not addressed above?

N/A 

B. Country-by-Country reporting ("CbCR")

1. Has the obligation to file a CbCR been implemented? If not, is the introduction of the CbCR being considered, and if so, when?

Yes, Article 76 section III of the ITL implemented the obligation to file a CbCR, which entered into force for reporting periods commencing on or after 1 January 2016.

2. If the obligation to file a CbCR is in force, what is the tax year from which this obligation applies and what is the deadline for filing the CbCR?

For each fiscal year the CBCR must be filed no later than 31 December of the next fiscal year. 12  The obligation entered into force for reporting periods commencing on or after 1 January 2016.

3. Which taxpayers are required to file a CbCR under the applicable laws?

Taxpayers are required to submit a CbCR when they fall within any of the following categories 13 :

  • multinational enterprise (“MNE”) companies, which shall be understood as companies meeting the following requirements:
    • seated in Mexico
    • with subsidiary companies defined in terms of financial information standards, or else PEs residing or located abroad as the case may be
    • that they are not subsidiaries of any other company residing abroad
    • bound to prepare, file and disclose consolidated financial statements in terms of financial information standards
    • report in their consolidated financial statements the income for entities residing in other or more countries or jurisdictions, or
    • have obtained in the immediately preceding fiscal year consolidated income for accounting effects equivalent to or exceeding MXN 12 billion, or
  • for legal entities residing in Mexico or abroad with PE in the country, which have been appointed by the holding company of the MNE group residing abroad as the parties responsible for providing the CbCR information return referred to in this section: the appointed legal entity must submit, not later than 31 December of the year following its appointment, a notice before the tax authorities under the terms established by the Tax Administration Services to such end through the general rules.

4. Is the content of the CbCR fully in line with the OECD model (final report on Action 13 of the BEPS project)? If not, what are the differences?

The content of the Mexican tax regulation (ITL, FTL and OTR) fairly adjusts to the content of Chapter V of the OECD TP Guidelines, specifically the one regarding the CbCR report. 14

5. What is the penalty for failing to file the CbCR on time? Can local subsidiaries of a foreign group suffer the local penalty if the foreign group has not filed the CbCR?

Those who fail to submit the CbCR, or who submit information with errors, inconsistencies or in a manner different from that required by tax regulations, will be sanctioned with a fine ranging from MXN 199,630-284,220 (approximately EUR 9,981-14,211). 15

Mexican tax regulation does not provide that local subsidiaries of a foreign group may suffer any local penalty in the event that the foreign group has not filed the CbCR; however, it does provide that the Mexican tax authorities may require legal entities resident in Mexican territory that are subsidiaries of a foreign-resident company, or foreign residents that have a branch established in the country, to file the CbCR in cases in which the tax authorities have not been able to obtain information corresponding to such declaration through the information exchange mechanisms established in international treaties that Mexico has in force. In such cases, taxpayers will have a maximum period of 120 business days to provide the CbCR. 16

6. Are there tax treaties in force allowing the communication of CbCR with other jurisdictions?

Yes, Mexico has entered into several international treaties that allow authorities from contracting states to exchange information regarding compliance with their respective tax obligations. 17  Examples include Argentina 18 , Spain 19 ,China 20  and the UK 21 , among others.

Likewise, when the Mexican tax authorities cannot obtain information on the CbCR through information exchange mechanisms established in international treaties that Mexico has in force, they may request the CbCR from legal entities resident in Mexican territory that are subsidiaries of a company resident abroad, or from residents abroad that have a PE in the country.

7. Any other relevant aspect not addressed above?

N/A 

C. As the case may be, other documentation / filing requirement in relation to transfer pricing?

1. Are there any other documentation/filing requirements in relation to TP?

Mexican tax regulations require that the Master File be submitted by entities that are part of an MNE group and meet any of the requirements provided by law.

2. If so, what is the content of such documentation / filing requirement? What language(s) are to be used by taxpayers?

The Master File must include information regarding the MNE group, such as:

  • legal organisational structure of each of the business units regardless of their category – controlling, holding, subsidiary, associate, affiliate, head office or branch
  • general description of the business activity of the MNE group
  • intangibles
  • financial activities with related parties
  • description of the supply chain
  • financial and tax position.

It may be filed in either Spanish or English. 22

3. What is the deadline for meeting this documentation / filing requirement?

The Master File must be filed no later than 31 December of the immediate subsequent fiscal year. 23

4. Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

This obligation applies to those entities that are part of an MNE group and comply with any of the following requirements:

  • those who are obligated to audit their financial statements
  • those who have declared accruable income in the amount equal to or greater than MXN 1,016,759,000 (approximately EUR 50,837,950)
  • those who, at the close of the immediately preceding fiscal year, have shares placed in the stock exchange market
  • companies that belong to the optional regime for corporate groups
  • foreign residents with a branch established in Mexico
  • those who are related parties of the parties that are obligated to report their financial statements.

5. What is the penalty for failing to meet this requirement on time?

Those who, being obligated to do so, fail to submit the Master File, or submit information with errors, inconsistencies or in a manner different from that indicated in the tax provisions, will be sanctioned. The applicable fine will be from MXN 199,630-284,220 (approximately EUR 9,981-EUR 14,211). 24

It is considered an aggravating circumstance for taxpayers to fail to file the informative returns provided in Article 76-A of the ITL. 25

6. Any other relevant aspect not addressed above?

According to Mexican tax regulations, taxpayers are required to submit information on transactions with related parties quarterly as part of their accounting, through the Tax Administration Service Portal. 26