• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 8/20/2013

Mexico - Focus on supply chain structures creating permanent establishments 

August 20:  An August 2013 release from Mexico’s tax administration (Servicio de Administración Tributaria) announces the launch of an audit program, under which the tax administration will move to verify tax compliance by entities with certain supply chain structures in Mexico.

New tax audit focus

Personnel changes within Mexico’s tax administration have followed the 2012 election and change in the executive administration. With these changes, there has been a renewed focus on the audit criteria for transfer pricing and permanent establishment (PE) issues.

Some new tax officials have informally stated their beliefs that certain structures are giving rise to previously unidentified PEs in Mexico. According to these tax officials, it is these PEs that are likely to be the focus of audits by the tax authority.

Supply chain structures

According to the August 2013 release, Mexico’s tax administration will be implementing an audit program to verify taxpayer compliance with the rules relating to supply chain structures in Mexico.

The audit program will target structures or transaction operations in which foreign residents conduct business in Mexico through related parties that act as economic agents without creating a permanent establishment in Mexico—therefore, with the axes relating to such supply chains not being paid in Mexico.

According to the tax administration, a main purpose of these audits will be to promote proper tax compliance by such supply chain structures.

KPMG observation

The tax administration has not announced or released detailed guidelines as to how it will proceed with this planned audit program.

However, tax professionals in Mexico strongly urge entities conducting business in Mexico to consider an immediate review of any structure that may give rise to PE concerns and to be prepared to address any potential issues in a tax audit.

For more information, contact a tax professional with KPMG’s Mexico tax center:

Jose Manuel Ramirez

(212) 872 6541

Gerardo Alvarez

(212) 758 9700

Or contact a tax professional with the KPMG member firm in Mexico:

Antonio Zuazua

+52 81 8122 1938

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