Mexico

In Mexico, companies must file "Master Declaration", "Local Declaration" and "Country-by-Country Declaration" according to the following criteria:

Local File ("Declaración Local")

The obligation to file the tax return applies to legal entities that fall into any of the following categories: 

• Those who are obliged to have their financial statements audited.
• Those who have declared accumulable income for an amount equal to or greater than $1,016,759,000.00 MXN.
• Those who at the close of the immediately preceding fiscal year have shares placed on the stock exchange.
• Companies that belong to the optional regime for groups of companies.
• Residents abroad with a permanent establishment in the country, for the activities they carry out in said establishments.
• Those who are related parties of the parties that are obliged to report their financial statements.

The Declaration is submitted annually by 15 May of each year for the immediately preceding financial year.

The information to be submitted covers the structure and activities of the legal entity, a detailed description of the taxpayer's business activities and strategies, as well as information on related party transactions and the transactions or companies used as comparables in its analysis.

Master File ("Declaración Maestra")

Of related parties of the multinational corporate group, i.e. of the group of related parties with a presence in two or more countries that also fall within the cases described in the previous section.

The Declaration is filed no later than 31 December of the year immediately following the tax year in question.

The Master Declaration should contain information regarding the multinational corporate group (legal organisational structure of each of the business units regardless of their category of controlling, holding, subsidiary, associate, affiliate, head office or permanent establishment, general description of the business activity of the multinational corporate group, description of the supply chain, among others).

Country by Country Report ("Declaración País por País")

Multinational corporate group. The following are obliged to file it: legal entities that enter into transactions with related parties, when:

• Are considered to be multinational controlling companies (have obtained consolidated revenues in the immediately preceding fiscal year for accounting purposes equivalent to or greater than 12 billion pesos); or
• Legal entities resident in national territory or resident abroad with a permanent establishment in the country, which have been designated by the controlling legal entity of the multinational corporate group resident abroad as responsible for providing it.

The Declaration is filed no later than 31 December of the year immediately following the tax year in question.

The Statement should contain information in respect of the multinational controlling entity's tax year, both on an aggregate basis and for each country or tax jurisdiction.

Pronouncements of the Procuraduría de la Defensa del Contribuyente ("Prodecon")

Resolution 7/2013/CTN/CS.SASEN

Prodecon has held that the obligation to submit Transfer Pricing studies and information on the transactions they have carried out through the multiple informative declaration is not a condition for the right to deduct to arise, but rather a formal requirement.

Criteria of the Federal Court of Administrative Justice ("TFJA")

Online Administrative Litigation Trial number 19/2530-24-01-02-02-OL/20/14-PL-10-00, resolved by the Plenary Jurisdictional Chamber of the Superior Chamber of the TFJA.

The Transfer Pricing Guidelines issued by the Organisation for Economic Co-operation and Development are a primary source of interpretation for the resolution of transfer pricing disputes (Digital Record IX-P-SS-206).

Contentious Administrative Judgment number 14253/08-17-05-3/1259/11-S2-08-04, resolved by the Second Section of the Superior Chamber of the TFJA.

In transnational transactions between related parties where: (i) the economic substance of the transaction differs from its form; or (ii) the overall valued arrangements differ from the arm's length principle and their structuring prevents the tax administration from determining the appropriate transfer price; the authority may determine its effects by disregarding the contractual transaction between the parties and determining the economic substance of the underlying transaction actually effected (Digital Register VII-P-2aS-353).

Criteria of the Federal Judiciary

Jurisprudence thesis 59/2024 (11th.). Approved by the First Chamber of the Supreme Court of Justice of the Nation ("SCJN").

The SCJN has established through case law that Mexican tax provisions limiting the deductibility of payments made to related parties when the counterparty's income is subject to preferential tax regimes are constitutional and comply with the principle of proportionality. This is because if the deduction of payments made to related parties subject to preferential tax regimes were unlimited, it would allow taxpayers to shift profits to other countries or territories and thereby erode the tax base in Mexico, so that income tax would no longer be paid through a tax base for avoidance purposes.

Pro rata expenses with residents abroad

In principle, in Mexico, pro rata expenses with residents abroad are not deductible; they may only be deducted when: (i) the expense is strictly indispensable for the taxpayer; (ii) there is a comprehensive information exchange agreement with the countries of the other residents involved; (iii) it is proven that the service was effectively rendered and, that the consideration corresponds to the arm's length principle; (iv) there is a reasonable relationship between the expense incurred and the benefit obtained, received or expected to be received; and (v) documentation is kept in respect of each transaction carried out abroad.