Ruling on Multilateral Instrument approved, and Mexico progresses towards its ratification
Ruling on Multilateral Instrument approved, and Mexico progresses towards its ratification

Precedent and Objective

As a result of the agreements by Mexico to avoid Base Erosion and Profit Sharing, [known by its initials “BEPS” in English], on October 9 the United Commissions on Foreign Affairs and the Ministry of Finance and Public Credit [in Spanish: las Comisiones Unidas de Relaciones Exteriores, Hacienda y Crédito Público], and the Senate, approved the ruling on the Multilateral Instrument [known by its initials “MLI” in English].

The aforementioned instrument stems from Action 15 of the BEPS project which allows governments to modify existing bilateral tax treaties in a synchronized and efficient manner, in order to apply the measures of the BEPS project, without needing to renegotiate each treaty bilaterally. Similarly, the Multilateral Instrument aims to strengthen existing tax treaties in order to protect governments against tax avoidance strategies from those who use such tax treaties illegally for artificially transferring profits to places that are subject to low or no taxation. Moreover, the MLI improves the mechanisms for resolving conflicts.

Effective date and main effects

The multilateral instrument came into force in July 2018 and began to take effect regarding taxation agreements covered by the jurisdictions that ratified it. For Mexico, the MLI will become effective from the first day of the fourth month following the date in which the instrument of ratification is filed, and as such, will take effect in accordance with the following (assuming that it is published in the Official Gazette of the Federation, [in Spanish: el Diario Oficial de la Federación], and is filed in the OECD for the remainder of 2022):

  • 2024 – Regarding tax withheld in source country,
  • 2023 – Regarding other taxes.

Through the implementation of the MLI, the definition of Permanent Establishment (“PE”) aligns with tax treaties as per our domestic law.

Nevertheless, the MLI will only enter into force for those treaties in which Mexico and its counterparts have mutually deemed as included jurisdictions. Those countries that belong to a network of tax treaties entered into by Mexico that have not yet signed the MLI are: Brazil, Ecuador, the Philippines, and the United States, while other countries such as Argentina, Colombia, Italy, Jamaica have not yet ratified it, and therefore; treaties with the mentioned countries will not be modified. 


It will be important to carry out a review of the operations and framework in light of which the benefits of the treaty have been applied, in order to identify the effects it will bring with regard to the application of the provisions of the MLI. It is important to carry out a timely analysis to avoid undesired effects that could be generated under the application of this instrument in operations at a global level. As always, JA del Río is at your service to analyze in detail the effects that the above mentioned could have on your company.  

If you have any questions, J.A. DEL RÍO can provide you with our experts who can advise you in such matters:

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