In September 2021, Mexico introduced an economic package for the year 2022 that included proposed changes to the country’s transfer pricing regime. Those changes, which can be broadly categorised as changes to the type of information that must be provided to the tax authorities and the introduction of additional reporting obligations, are in effect as of 1 January 2022.
The changes introduced by the legislation include the following amendments to the transfer pricing documentation rules.
The tax legislation modifies existing law to provide that domestic related-party transactions will be subject to the same documentation requirements that apply to related-party transactions with nonresidents.
A functional analysis must be carried out that includes information regarding the functions, assets and risks of the taxpayer and any related parties involved in the transaction.
Under the new rules, the transfer pricing report must include a list of all adjustments that were performed to improve the comparability of the chosen comparables.
The new rules require that taxpayers identify in their accounting records information regarding intercompany transactions with both domestic and nonresident related parties.
The information regarding the comparable businesses used in the transfer pricing study must be contemporaneous for the tax year under analysis. In the event that information from the three prior fiscal years is used, the taxpayer must provide an explanation regarding the transaction’s business cycle, which may cover more than one year.
Finally, the new rules provide that the arm’s length range can only be adjusted using the interquartile method.
Regarding taxpayers’ reporting obligations, the new rules provide that:
Argel Romero Dominguez