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  1. Home
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  3. 2021 Proposed Mexico Tax Reform Package

2021 Proposed Mexico Tax Reform Package

Posted by Carlos Calderon on October 27, 2020

Carlos Calderon Carlos Calderon

If you’re following the story, a revised version of the Mexico tax reform package for fiscal year 2021 is expected to be approved by the Senate and House of Representatives by October 31, 2020. If approved, the tax proposal would go into effect on January 1, 2021. Here are some of the proposed amendments regarding economic impacts and tax laws.

Projected Economic Impacts

  • Gross Domestic Product – increase between 3.6% and 5.6%
  • Income – decrease of 3% compared to 2020
  • Foreign Exchange Projection – 1 USD = 22.1 Mexican Pesos
  • Tax revenue – decrease of 2.6% compared to 2020
  • Inflation – 3% annually

Overall, Mexican President Andrés Manuel López Obrador continues with public policy of not creating new taxes or increasing the preexisting tax rates. One of the main objectives of these tax proposals is to incorporate rules that empower authority to strengthen surveillance of areas such as: mergers and splits, simulated transactions, and tax refunds, among others.

The economic package contains proposed modifications to the actual Income Tax Law, Value Added Tax Law, and Special Excise Tax Law, as well as changes for transfer pricing ruling for Maquiladoras.

Key Proposed Tax Law Changes

Transfer pricing for Maquiladoras

2020

  • Transactional profit methods
  • Safe harbor
  • Advanced Pricing Agreement (APA) with tax authorities

2021

  • Safe harbor
  • Advance Pricing Agreement (APA) with tax authorities

Value Added Tax

  • Reinforcement of digital services ruling
  • Addition of alternative for offering digital services in Mexico without needing a Mexican Entity
    • 2020
      • Laws and rulings established the necessary incorporation of an entity or a permanent establishment for entities offering digital services through a Mexican digital platform.
    • 2021
      • To develop a larger market of digital service offerings in Mexico, the Mexican government is requiring a 100% withholding for services offered through a Mexican platform from a foreign provider. The goal is to reduce the administrative burden for non-Mexican companies, increase the digital services offered in Mexico, and increase the tax collection for the Mexican government.

Income Tax Law

  • Changes mainly related to not-for-profit entities

COVID considerations

  • None
Contact Us

By the end of the month, we should have a comprehensive and final update on the 2021 Mexico tax reform package containing major insights and perspectives for the upcoming year. For additional information, call us at 248-208-8860 or click here to contact us. We look forward to speaking with you soon.

Our team is always ready to help.

Please contact us for more information.

Carlos Calderon

Carlos Calderon

Manager, International Consulting

Contact Carlos   |   Read Carlos's bio

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2021 Proposed Mexico Tax Reform Package

Posted by Carlos Calderon on October 27, 2020

Carlos Calderon

If you’re following the story, a revised version of the Mexico tax reform package for fiscal year 2021 is expected to be approved by the Senate and House of Representatives by October 31, 2020. If approved, the tax proposal would go into effect on January 1, 2021. Here are some of the proposed amendments regarding economic impacts and tax laws.

Projected Economic Impacts

  • Gross Domestic Product – increase between 3.6% and 5.6%
  • Income – decrease of 3% compared to 2020
  • Foreign Exchange Projection – 1 USD = 22.1 Mexican Pesos
  • Tax revenue – decrease of 2.6% compared to 2020
  • Inflation – 3% annually

Overall, Mexican President Andrés Manuel López Obrador continues with public policy of not creating new taxes or increasing the preexisting tax rates. One of the main objectives of these tax proposals is to incorporate rules that empower authority to strengthen surveillance of areas such as: mergers and splits, simulated transactions, and tax refunds, among others.

The economic package contains proposed modifications to the actual Income Tax Law, Value Added Tax Law, and Special Excise Tax Law, as well as changes for transfer pricing ruling for Maquiladoras.

Key Proposed Tax Law Changes

Transfer pricing for Maquiladoras

2020

  • Transactional profit methods
  • Safe harbor
  • Advanced Pricing Agreement (APA) with tax authorities

2021

  • Safe harbor
  • Advance Pricing Agreement (APA) with tax authorities

Value Added Tax

  • Reinforcement of digital services ruling
  • Addition of alternative for offering digital services in Mexico without needing a Mexican Entity
    • 2020
      • Laws and rulings established the necessary incorporation of an entity or a permanent establishment for entities offering digital services through a Mexican digital platform.
    • 2021
      • To develop a larger market of digital service offerings in Mexico, the Mexican government is requiring a 100% withholding for services offered through a Mexican platform from a foreign provider. The goal is to reduce the administrative burden for non-Mexican companies, increase the digital services offered in Mexico, and increase the tax collection for the Mexican government.

Income Tax Law

  • Changes mainly related to not-for-profit entities

COVID considerations

  • None
Contact Us

By the end of the month, we should have a comprehensive and final update on the 2021 Mexico tax reform package containing major insights and perspectives for the upcoming year. For additional information, call us at 248-208-8860 or click here to contact us. We look forward to speaking with you soon.

Our team is always ready to help.

Please contact us for more information.

Carlos Calderon

Manager, International Consulting

Contact Carlos   |   Read Carlos's bio

related news

IRS Issues New Guidance on PPP and Employee Retention Credit Eligibility

The IRS issued highly anticipated guidance regarding the employee retention credit (ERC) on March 1. We have previously outlined how the Consolidated Appropriations Act, passed in December, permitted employers receiving…

Read full story

Honoring International Women’s Day

In honor of International Women’s Day, I’d like to take a moment to recognize the talented women who have helped build our outstanding reputation within the business community – both…

Read full story

How to Calculate R&D Tax Credits

As we’ve seen in the first two installments of this series, business owners often miss out on the R&D tax credit opportunity and the bottom-line infusion it can provide. Many…

Read full story

Doing Business in Mexico: What to Expect this Year

Without a doubt, this year will be interesting for Mexico. To start, it’s an election year and we all know what that means…a lot of uncertainty. As the global pandemic…

Read full story

What Expenses Qualify for R&D Tax Credits?

The R&D tax credit is one of the most overlooked opportunities to boost your bottom line. Many business owners fail to claim it under the mistaken belief that they’re not…

Read full story

Categories

Jump directly to the topics that matter to you most.

  • A&E Professional Services
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  • Denise Asker
  • Eric Lin
  • Jim Biehl
  • Julie Killian
  • Kevin Johns
  • Margaret Amsden
  • Miroslav Georgiev
  • Nina Wang
  • Rob Dutkiewicz
  • Ruben Ramirez
  • Sarah Russell
  • Sue Tuson
  • Tarah Ablett
  • Teresa Gordon
  • Tim Finerty
  • Tim Hilligoss
  • Wendy Reedy

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Additional news from Clayton & McKervey can be found below.

  • Subscribe to our email newsletter
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