Budget 2013: Mexico Reforms Tax Provisions

The Mexican budget, approved by the Congress, has been published in the Official Gazette on December 17, 2012.
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Sunnyvale, CA (prHWY.com) January 24, 2013 - Mexico Budget 2013: Highlights
Income Tax: Major Changes
* Income tax rate remains at 30% in 2013
 A withholding tax of 4.9% has been imposed on interest paid to non-resident banks which are resident in a country having a tax treaty in force with Mexico.

* As per existing provisions, Mexican companies with foreign pension funds as shareholders are tax exempt, in proportion of the pension funds' participation in the Mexican company, provided 90% of their total receivables are derived from:
 The transfer of ownership of property or rent of land or buildings located in Mexico, or
 The transfer of ownership of shares deriving more than half of their value from land and buildings located in Mexico.
 For the calculation of this 90% of receipts, annual inflation adjustment is excluded. Also, foreign exchange gain on any debts incurred for the acquisition of property located in Mexico would be excluded.

* Non-residents who carry out activities subject to the general income tax, and under a maquila programme authorized by the Government (Secretaría de Economía) would not be considered to have a permanent establishment in Mexico, if they satisfy the below conditions:
 The non-resident and the enterprise operating under maquila are not directly or indirectly related parties; and
 Information (as may be requested by the Tax Administration Service) about the maquilla related operations is submitted by the non-resident company to the Tax Administration Service before July 2014.

Some IETU (Business flat-rate tax) adjustments reflected in the budget are:

* Taxpayers would have to continue to submit informative returns (information would also be required to be provided concerning the concepts which have been used to determine the tax base).
* Set off of excess deductions of IETU tax credit against income tax liability in the tax year in which such excess was incurred will not be permitted.

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