September 17, 2013
Calgary, International Corporate Tax
Penny Woolford and Alex Feness
Toronto, International Corporate Tax
Montreal, International Corporate Tax
On September 8, 2013, Mexico's Congress was presented with an economic package for 2014 that includes proposals to repeal the single rate business tax and the tax on cash deposits, and eliminate certain special tax regimes and deductions. Also, new taxes would be imposed, under an "ecological purpose" regime, on the import and sale of fossil fuels.
Corporate tax measures
Among other amendments, the economic package proposes to:
- Impose a corporate income tax rate of 30% and repeal the current phase-down (i.e., 29% scheduled for 2014 and 28% for 2015 and later years)
- Impose an additional corporate income tax of 10% on profits and dividends paid to Mexican individuals and foreign residents.
Proposals to limit various deductions
Related party payments - The legislation proposes to deny deductibility for payments made to related parties (residents either in Mexico or abroad) for which the income is not taxable or, if taxable, has an effective tax rate of less than 75% of the tax that would have been paid in Mexico.
Depreciation in the renewable energy sector - Mexico is also proposing to repeal provisions allowing immediate or accelerated depreciation of investments. Beginning in 2014, investments will only be deductible under the straight-line method of depreciation using standard maximum depreciation rates. This proposal applies to machinery and equipment used to produce renewable energy.
Banks - Under the proposed legislation, effective from 2014, banks and insurance companies would no longer be able to deduct amounts made to reserves, but only deduct amounts of authorized write-offs.
The proposals repeal the 11% rate of value added tax (VAT) currently applicable for the border region (the border between Mexico and the United States), and would impose the general VAT rate of 16%.
Federal tax code
The legislation would provide an anti-abuse clause, allowing the tax authorities to challenge the tax effects of transactions that are seen as having no business purpose or reasons.
For more information, contact your KPMG adviser.
Information is current to September 17, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500