Action 13 BEPS OECD – Article 76-A LISR (Income Tax Act)
Mexico has made changes to its legislation motivated by the 15 Reports on the action plan “BEPS” by the Organization for Economic Cooperation and Development (“OECD”) of which it is a member, and whose purpose is to avoid eroding the tax base and the transfer of profits by international groups.
In particular, the purpose of BEPS action 13 is for taxpayers to prepare an information “package” regarding the group they are part of and their transactions with related parties, allowing the evaluation of risks as to transfer pricing, therefore, and in accordance with article 76-A of the Income Tax Act, the obligation to file the following informative returns is established:
I. Master Informative Return on Related Parties.
II. Local Informative Return on Related Parties.
III. Informative Return per Country.
These are to be filed no later than December 31st of the year immediately after the fiscal year being reported. First statements expire on December 31st of this year.
These informative returns are applicable to the following taxpayers executing transactions with related parties and who in addition;
I. Are required to file the Informative Return on Tax Status (Declaración Informativa Sobre Situación Fiscal (DISIF)) for 2016.
II. Companies belonging to the optional regime for groups of companies.
III. State-owned entities of the federal public administration
IV. Artificial persons residing abroad with a permanent establishment in the country
It is necessary to clarify that only the applicable informative return is to be filed in accordance with the characteristics briefly summarized below:
I. Master Informative Return on Related Parties:
The informative return focuses principally on global information on the Multinational Group the taxpayer is part of.
• Organizational Structure.
• Description of the activity, intangible assets, financial activities with related parties. Description of the relevant factors that generate profits for multinational business group.
• Intangible assets
• Information as to the financial and tax position.
Through a fiscal miscellaneous rule, it is foreseen that when a group of taxpayers carry out operations of related parties and belong to the same multinational enterprise group, they may present a single joint declaration of the annual informative statement, provided that the required taxpayer belonging to the multinational business group, selects the joint statement option in said statement.
II. Local Informative Return of Related Parties:
This informative return shall provide specific information of the taxpayer in Mexico, through the analysis of its transactions pursuant to transfer pricing.
• Description of the administrative and organizational structure, strategic and business activities, as well as its transactions with related parties.
• Financial Information on the obligated taxpayer and/or analyzed party.
• Information on transactions with related parties or companies used as comparable in the analysis.
• Information operations with related parties or companies used comparative in its analysis, such as copies of contracts, copies of the prospective transfer pricing agreements, unilateral, bilateral or multilateral, among others.
It is important to comment that this informative return shall not differ greatly from the current returns on transactions with related parties.
III. Informative Return per Country:
The information to be provided shall be directly related to the global distribution of income, (including sales of inventories and properties, services, royalties, interests, premiums and other concepts) their obligations and tax payments, the list of subsidiaries, as well as the countries in which these are located, in addition, they shall indicate the main activity for each member of the group.
In order to submit it, in addition to the obligation described above, it must be under any of the following assumptions:
a) They are controlling multinational companies, which are those who meet the following requirements:
1. Residence in Mexico.
2. Having subsidiary companies, permanent establishments, residing or located abroad.
3. Not subsidiaries of another company residing abroad.
4. Are under the obligation to prepare, file and disclose consolidated financial statements in terms of financial reporting standards.
5. Report, in their financial statement, results of entities with residence in one or more countries or jurisdictions.
6. Have obtained during the immediate previous tax year, consolidated income for tax purposes greater than or equal to twelve million pesos.
b) They are companies in Mexico or permanent establishments in Mexico having been designated by the controlling company of the multinational business group residing abroad as responsible for filing the informative return per country. Some of the information required
• Information at tax jurisdiction level on the global distribution of income and taxes paid.
• Location indicators of the economic activities on the tax jurisdictions the multinational business group operates in the corresponding fiscal year, which must include tax jurisdiction.
• Total income, separating the amount obtained with related parties from the amount obtained with independent parties.
• Profits or losses before taxes.
• Income Tax effectively paid.
• Income Tax generated during the fiscal year.
• Capital accounts, accumulated profits or losses.
• Number of employees.
• Fixe d assets and merchandise
In the event not complying with the filing of the informative returns in question or providing incomplete information, information with errors, inconsistencies, or if submitted in a form other than as indicated, the taxpayer shall receive a fine of $140,540 to $200,090 pesos
This group of informative returns are the result of BEPS strategies taken by the OECD, as well as multiple international organisms.
We recommend working jointly with the corporate group, transfer pricing specialists and tax advisors in Mexico in order to correctly complete the information. There is the possibility for other countries to request similar information from their taxpayers, with whom Mexico is a related party.
In addition, it is important to remember that there are currently multilateral information exchange agreements in place between several countries and the authority will be able to confirm the information provided.
Please contact us if you have any question or comment regarding this.