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2021 Proposed Mexico Tax Reform Package

Posted on October 27, 2020 by

Carlos Calderon

Carlos Calderon

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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.

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Carlos Calderon

International Accounting & Tax Consultant – Mexico

Fluent in Spanish and dedicated to client growth, Carlos helps businesses expand to Mexico from the U.S. and abroad.

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