Mexico has enacted its 2014 package of tax reforms that will affect Canadian entities with investments in Mexico. Among other changes, these tax reforms include amendments to the application of treaty benefits to related party transactions, limitations on certain deductions and the introduction of withholding tax on dividends. The reforms, which were passed on December 11, 2013, will be effective January 1, 2014. As a result, Canadian companies with operations in Mexico should consider the impact of these reforms on their year-end planning, including distributions from Mexican subsidiaries.
Canadian companies with investments in Mexico will also need to ensure the impact of these reforms is appropriately reflected in their financial statements that include the date of enactment (i.e., December 11, 2013) for purposes of U.S. GAAP, or substantive enactment (i.e., December 6, 2013, when the President signed the Decree) for purposes of IFRS or Accounting Standards for Private Enterprises (ASPE).
In September 2013, Mexico's Congress was presented with an economic package for 2014 that included, among other changes, various proposals to limit deductions, impose additional corporate income tax on profits or dividends distributed to foreign shareholders and implement anti-abuse rules. In late October 2013, the Senate approved the tax reform provisions, following the passing of a revised version of the package by the congressional committee earlier that month.
For more details on the key legislative changes included in these reforms that could impact Canadian investors in Mexico, see TaxNewsFlash-Canada 2013-38, "Mexico's Tax Reform Will Affect Foreign Investment". [PDF 52Kb]
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Your KPMG adviser can help you assess the impact of these reforms on your business, and point out ways to take advantage of any benefits arising from the new rules or help mitigate their impact. For more details, contact your KPMG adviser.
Information is current to December 13, 2013. The information contained in this TaxNewsFlash-Canada 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.
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