• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/19/2014

Mexico - Details of hydrocarbon tax in energy reform proposals 

May 19: Legislative proposals announced by Mexico’s government would, if approved by the Congress and enacted into law, revise the rules for taxation of amounts relating to exploration and extraction of hydrocarbons, effective 1 January 2015.

The hydrocarbon revenue provisions would establish a new tax regime regarding contracts and assignment agreements for the exploration and extraction of hydrocarbon activities.

Under the proposal, the additional revenue from this new law would come exclusively from contracts and assignment agreements, and would be designated to a federal trust (referred to, in English, as the Mexican Petroleum Fund) that would, as recipient of the payments, serve as the administrator of the trust funds.

Among the tax provisions:

  • Contract and assignment agreement holders would not be required to distribute profits to their employees, but, the proposal would allow for other types of incentives of similar characteristics.

  • Foreign entities involved in hydrocarbon extraction and exploitation activities for longer than a 30-day period would be deemed to have a permanent establishment (PE) in Mexico. There also would be attribution rules for determining the 30-day period threshold for similar or identical activities conducted by related parties or by joint projects of which the foreign entity is a party.

  • Wages and salaries paid to individuals for activities performed in Mexico, for a duration of 30 days within a 12-month period, when paid by a foreign entity not deemed to have a PE in Mexico and when related to a hydrocarbon contract or assignment agreement holders, would be subject to Mexican income tax.

Read a May 2014 report [PDF 662 KB] prepared by the KPMG member firm in Mexico.

For more information, contact a tax professional with KPMG in Mexico:

Gabriel Andrade


Roberto Mendoza


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