1. Mexican Tax Reform Mexico’s Fiscal and Legal Reforms 2014
John McLees, Manuel Padron, Mounia Benabdallah
January 23, 2014
Chicago, Illinois
U.S. Mexico Chamber of Commerce

2. Tax Reform Overview Proposed on September 9, 2013
Contemplated by the 2013 pact among the major political parties
Little advance notice of the terms of the reform
Government agreed to significant changes during the legislative process, for example:
On the form of the new tax on dividends
On the terms of some of the new limitations on deductions
On the proposed new Maquiladora tax rules
Effective date – generally January 1, 2014
Supplemented at the end of 2013 by:
Presidential Decree, Miscellaneous Regulations

3. Repeal of the “Single Rate Tax” (the “IETU “)
The repeal reduces the tax burden for companies in Mexico and greatly simplifies tax compliance & planning
IETU was calculated on a cash flow basis
On a broader tax base
Including the gross sales price on a sale of assets
With no deduction for related party royalties or most interest payments
IETU was paid to the extent it exceeded the income tax
No IETU implications in 2014 or future years
What about the future? Will Mexico resort to some other minimum tax?
The asset tax applied from 1989 to 2007
The single rate tax (IETU) applied from 2008 through 2012

4. Repeal of Cash Deposit Tax (the “IDE”)
IDE only applied to deposits of cash money (bills and coins)
e.g. by retailers and restaurants
IDE functioned as a control tax – directed at the informal economy
Was recoverable by a taxpayer that satisfied its other tax liabilities.
IDE replaced by new reporting obligations for Banks
Regarding companies and individual depositing more than 15,000 pesos (US $ 1,130) per month in cash money

5. New Excise Taxes (“IEPS”)
One peso per liter tax on sales of sweetened beverages.
Also applies to extracts, powders, and syrups that contain all different types of added sugars (monosaccharaides, disaccharides, and polysaccharides with caloric content)
8% tax on sales of non-basic food with high caloric content
Tax on sales of fossil fuels
Rates based on CO2 level.
Tax on sales of pesticides
Rates based on toxicity.

6. New Royalties Taxes on Mining Operations
0.5% on gross revenue from gold, silver and platinum mining
7.5% over “extended” profit from any mining activity:
Income minus certain deductions
Including amortization of exploration and development expenses
No deduction for interest or other depreciation
No annual inflation adjustment
Out of that 7.5%:
80% goes to a fund for the regional sustainable development of mining in States and Municipalities
62.5% for Municipalities and 37.5% for States
20% goes to the Federal government

7. Changes in Tax Rates VAT 16% rate extended to the entire country
Repealed the lower 11% rate in the border area
Individual income tax
Increased for those with income of more than 500,000 pesos (approximately US$ 38,500) per year
Up to 35% on income higher than 3 million pesos (approximately US$ 231,000) per year
Corporate income tax
Remains at 30%
Had been scheduled to go down to 29% and then 28%
Tax rate for foreign parties on net income from sale of shares – increased to 35%

8. New Income Tax Law - Overview
Section numbers changed from prior income tax law
Changes focus on:
Limiting some deductions for companies and individuals
Increasing the tax burden on international operations companies
On corporate distributions
On other payments from related parties in Mexico
On Maquiladora operations
Attempting to place new conditions on benefiting from tax treaties
Eliminating or limiting application of special tax regimes

9. Individual Income Tax Gain on the sale of publicly traded shares
Now taxed at 10%
Exemption eliminated
Limitations on total personal deductions
Limited to the lesser of 10% on total income or 4 yearly minimum wages.
All payments must be done through the financial system to be deductible
Practical aspects
Taxpayers from the upper tier claim 87% of the personal deductions.
Individuals who are not obliged to file their annual tax return often do not claim their personal deductions.

10. Corporate Income Tax – Overview
New income tax law maintains basic structure of the corporate income tax
Tax imposed on net income – generally determined on an accrual basis
Deductions are subject to technical requirements
Deductions of payments to foreign parties
Subject to special scrutiny (especially payments for services)
Thin cap rules limit deduction of interest to related parties
Transfer pricing is a major focus (re amount of income and deductions in related party transactions)
Mexico has generally applied OECD principles
Increasing focus on base erosion and profit shifting

11. Corporate Income Tax – Overview
No change in the adjustments for inflation and for currency gains & losses
All amounts with significance across years are adjusted for inflation
Imputed inflationary income (loss) is recognized each year for taxpayers with net liabilities (net financial assets)
Currency gains and losses also recognized each year

12. Corporate Income Tax – Overview
Additional tax continues to be imposed on the distributing company on some corporate distributions
And on some funds transfers from foreign company’s branch/PE to its home office
Applies at 42% to corporate distributions treated as dividends (and branch remittances treated as payments of distributable profits) in excess the CUFIN of the company/branch
= 35% on grossed up amount of that excess
CUFIN = cumulative taxable income, reduced by:
income tax paid
nondeductible expenses
prior distributions and
tax losses
Note on timing – current year after-tax income does not increase CUFIN until the end of the year

13. Corporate Income Tax – Income Recognition
Change in the tax treatment of installment sales
Income recognition now based on accrual
Repealed the option for deferring income recognition to time payments due or payable

14. Corporate Income Tax – CFC Rules (“REFIPRES”)
New categories of income of a foreign subsidiary on which the Mexican parent is subject to tax on a current basis
Selling / buying real estate.
Granting the temporary use of an asset.

15. Corporate Income Tax – Deductions
Immediate deduction of investments in fixed assets is eliminated
Must now use normal depreciation schedules in the income tax law
Exception for developers
Still can deduct the cost of land for construction projects in the year of acquisition

16. Food stamps – Requirement for Deductions
Corporate Income Tax – Deductions
New requirements for certain deductible expenses
Mining industry – Amortization of Expenses
Exploration expenses now deductible in a 10 year period.
No longer deductible in the year in which they are made.
Food stamps – Requirement for Deductions
Granted via electronic cards approved by tax authorities.

17. Corporate Income Tax – New Limits on Deductions
Vehicles
For acquisition cost – 130,000 pesos (down from 175,000)
For rental payments – 200 pesos daily (down from __)
Corporate Income Tax – New Limits on Deductions
Social Security Payments
Payments made by the employer on behalf of workers are no longer deductible.
Payments of Workers’ Tax Exempt Income
Now only 47% deductible (53% deductible if the employer
continues to provide the same exempt fringe benefits as
in the prior year).
Contributions to Pension Funds
Now only 47% deductible (53% deductible if the employer
does not cut pension contributions from the prior year).

18. Corporate Income Tax – New Limits on Deductions
Article 28. XXXI – Payments of interest, royalties or technical assistance to a related foreign party (when one party controls the other)
Are now nondeductible (inspired by the BEPS initiatives):
If payment is not considered as existing or not considered as taxable income in the other jurisdiction [e.g. payments from a disregarded Mexican entity to its parent company], or
If the recipient is a transparent entity, unless
(i) its shareholders [its direct shareholders? all of them?] are subject to taxation
and
(ii) the payment is an arm’s length amount

19. Corporate Income Tax – New Limits on Deductions
Article 28. XXIX – Payments to a foreign party that deducts that same payment
Are now nondeductible in Mexico
Unless the foreign party is subject to tax on the related income (if any) currently or in the following year.
This exception provides protection when a US company deducts the expenses of a Mexican subsidiary that is a disregarded entity
Provision designed to avoid “double dipping” (again inspired by the BEPS initiatives)
[when would the limitation apply?]

20. Corporate Income Tax – New Limits on Deductions
Example of the application of the new rules
Under second rule (XXIX) Payment 4 would be deductible – because US Parent includes the income (and deductions) of Mexican sub in determining its taxable income in the U.S.
BUT – Under the first rule (XXXI), payment 4 appears NOT to be deductible without any exception – because payment is treated “not existing” under the US check the box rules
Result – double taxation

21. Corporate Income Tax – New Limits on Deductions
Constitutional issues
Are these limitations on deductions Article 28. XXIX and Article 28. XXXI constitutional and thus valid?
They make the deduction depend on the tax treatment of the recipient in the foreign jurisdiction
That should be irrelevant under the under the “proportionality” principal in Mexico:
Providing that a taxpayer must contribute based on its income, profit, return or sign of wealth, consistent with its ability to contribute
These are among the potential constitutional challenges to several provisions in the new law.
First deadline for filing constitutional challenges
February 14, 2014

22. Corporate Income Tax – Tax Consolidation
Existing tax consolidation regime is eliminated
Must recognize income deferred under consolidation and not already recognized
Additional tax computed in the 2013 tax return
Additional tax paid over 5 years ( ).
New optional consolidation regime starting in 2015
For those electing by 2/15/14
Income tax can be deferred for up to 3 years.
Stock ownership requirement: 80%.
Cannot include maquiladoras
Pre-2014 losses cannot be taken into account
No deferral of tax imposed on dividends paid in excess of CUFIN

23. Corporate Income Tax – Special Tax Regimes
New limitations on simplified tax regime for agricultural activities
Taxpayers with agricultural activities keep some of the benefits of simplified regime
Cash flow instead of accrual for recognizing revenues and deductions
Some tax exemptions
Tax rate reduction to 21% for first 400 million pesos (US $30 million) in taxable income

24. Corporate Income Tax – Joint Responsibility of Shareholders
As before, joint responsibility only if the Mexican company:
Is not registered, or
Fails to provide notice of a change of domicile, or
Does not having accounting records, or
Hass destroyed its accounting records.
New law has clarified that the extent of joint liability of a shareholder:
Multiply tax liability by its %age participation in the share capital of the company.

25. Corporate Income Tax – Taxation of Foreign Parties
Overview - overall structure is generally unchanged under the new law
Withholding taxes imposed at varying rates on payment to foreign parties
Higher withholding tax on payments to parties in low-tax jurisdictions without a treaty
PE concept under domestic law applies to impose tax on net income of a foreign party
More aggressive than Mexico’s treaty definitions
For companies holding stocks of goods in Mexico
For companies with independent agents in Mexico
Heavy reliance on tax treaties
To avoid withholding tax on payments for services
To obtain more predictable and less onerous PE rules

26. Corporate Income Tax – Taxation of Foreign Parties
Changes in taxation of Foreign Pension Fund investments in Mexico
Changes in exemption for gain from the sale real property leased to third in Mexico
Required lease period before sale is now 4 years (up from 1 year).
Tax registration obligation eliminated
As before
Remaining requirements: foreign pension fund must be:
Effective beneficiary of the exempt income and
Exempt from income tax in its country of residency.
Property registered as inventory will not be covered by the exemption.

27. Corporate Income Tax – Taxation of Foreign Parties
Foreign-party sales (and other transfers) of MexCo shares
Still are generally taxable, even under tax treaties
Tax rate increased to 35% on net gain if the foreign party elects to be subject to tax on net gain on transfer of shares
Default position (absent election) – foreign seller subject to tax at 25% on the gross sale price
Collected as withholding tax if the buyer is Mexican or PE of nonresident company
Mexican company can be liable for the tax
Election to be taxed on net gain (if any) requires seller to take several steps in a timely fashion, including:
Appointment of a representative in Mexico
Note US-Mexico tax treaty provisions for avoiding tax on transfers in an internal restructuring

28. Corporate Income Tax – New Tax on Dividends
New dividend withholding tax
10% withholding tax on dividend payments to non-resident shareholders or to individuals
Applies to dividends distributed after 12/31/2013, with exceptions
Increases effective tax rate to 37% on distributed earnings
e.g. (30% x 100) + (10% x 70) = 37%
Withholding tax reduced under tax treaties:
To as low as zero under some treaties:
U.S. treaty (for an 80% shareholder)
Dutch treaty (when the participation exemption applies in the Netherlands)
To a minimum of 8% under the Luxembourg treaty

29. Corporate Income Tax – New Tax on Dividends
Exemptions from the new dividend withholding tax
Dividends paid from CUFIN accumulated as of December 31, 2013
Important condition: Must keep records of cumulative undistributed CUFIN as of December 31, 2013
What about distribution of book retained earnings in excess of CUFIN as of the end of 2013?
Government position – no exemption
Statutory language could support an exemption
What about dividends paid from a Mexican subsidiary to a Mexican holding company in 2014?
Is sub’s 2013 CUFIN included in 2013 CUFIN of the holding company (contrary to the normal rule)?
Yes – under Miscellaneous rule issued in December

30. Corporate Income Tax – New Tax on Branch Transfers
New tax on branch distributions
10% tax on distributions (i.e. remittances) from a branch or other permanent establishment to the company’s home office
Applies to transfer of funds from PE to the home office that are treated as a transfer of distributable profits
Also applies on remittances from one PE to another
Exemption for remittances out of the accumulated CUFIN of the PE as of 12/31/13 (similar to exemption for dividends)
Do tax treaties protect taxpayers from this tax?
How do the permanent establishment and business profits articles apply?
What about the nondiscrimination articles?

31. New Authority to Limit Enjoyment of Treaty Benefits
Authorities can now require a foreign party relying on the treaty to file a document (under oath) establishing the double tax effect in the absence of a treaty
For a withholding tax issue – getting a lower with/holding tax rate under a tax treaty
Practical issue for Mexican party making the payment
Mexican party needs to make sure that certification is on file
To avoid obligation to pay additional tax not withheld
Based on what information if payment is to a third party?

32. New Authority to Limit Enjoyment of Treaty Benefits
For a PE issue –relying on narrower PE definition in a tax treaty
Practical issue for a Mexican party paying a foreign party
IF the foreign party has a PE, the Mexican party’s deduction will depend on getting a Mexican invoice from the foreign party
Mexican party needs to make sure that the certification is on file
If it wants rely on avoiding a PE under a treaty definition – to avoid need to get Mexican invoice from a foreign company to get a deduction for its payment

33. New Authority to Limit Enjoyment of Treaty Benefits
Will authorities use the new authority to try to limit benefits granted by Mexico’s tax treaties?
Would that be valid / legal / constitutional in Mexico?
Would the new authority include requiring such a certification in the case of dividend payment?
Note additional grounds for challenging the validity of protection under Mexico-Dutch treaty
Provision in the protocol prohibiting Mexico from taxing dividends subject to a participation exemption in the Netherlands

34. Corporate Income Tax – New Tax on Dividends
Taking advantage of the Dutch tax treaty to avoid Mexican withholding tax on dividends (case 1)
For a MexCo owned by a Luxembourg company (common ownership structure for maquiladora companies)
Objective: to avoid 8% tax on dividends under the Luxembourg treaty
Option 1 – Move place of effective management of LuxCo to the Netherlands (and meet strict substance rules)
LuxCo treated as Dutch resident and not Lux resident under the Dutch-Lux tax treaty and Dutch law
Option 2 – Cross Border Conversion (of LuxCo into a DutchCo) using EU Directives
Option 3 – Cross Border Merger (LuxCo into a separate DutchCo) using EU Directives (taxable in Mexico, possible exit tax in Lux.)

35. Corporate Income Tax – New Tax on Dividends
Taking advantage of the Dutch tax treaty to avoid Mexican withholding tax on dividends (case 2)
For a MexCo owned by disregarded US LLC
Objective: to minimize risk of denial of treaty benefits if required to show the avoidance of double taxation.
Question – does new authority to question that apply to dividends (it that an “operacion”)?
Cause Mexico-Netherlands tax treaty to apply by moving place of effective management of the LLC to Netherlands (and meet strict substance rules)
LLC treated as resident of the Netherlands under the Dutch-Mexico tax treaty and Dutch law
Special protection of dividends from Mexico withholding under the Dutch-Mexico treaty

36. Investing Through the Netherlands
Favorable bilateral tax treaty allows for:
5% (or even 0%) wh/tax rate on dividends
5% or 10% wh/tax on interest
10% wh/tax on royalties
capital gains tax exemption for corporate reorganizations
Bilateral Investment Treaty
Netherlands Participation Exemption regime
Netherlands – favorable outbound structures (e.g. tax treaty with the U.S.)
Importance of Substance
US Parent
Dutch Resident Company
Active
Mexican subsidiary

37. Maquiladora Tax Regime – Overview of Changes
Special lower income tax rate – repealed
2003 Presidential Decree on maquiladora taxation revoked
Maquiladoras now subject to the regular 30% rate
Remaining income tax benefits for maquiladoras:
Special PE exemption for foreign principals in consignment manufacturing arrangements with maquiladoras
Special exemption from the new limit on deductions for compensation that is tax-free to the employees
New VAT rules for:
Avoiding VAT payments on temporary importation of goods
Will be subject to certification requirements in 2015
Avoiding VAT on sales of temporarily imported goods to the maquiladora – also will depend on certification

38. Maquiladora Tax Regime – Special PE Exemption
New requirements for getting a PE exemption for a foreign principal in a consignment manufacturing arrangement
More limited choices on how to qualify for that exemption
Can no longer rely on getting a transfer pricing study demonstrating OECD pricing + 1% of M&E made available on free bailment
Must reach safe harbor threshold for taxable income
or obtain an Advance Pricing Agreement (an “APA”)
Taxable income safe harbor unchanged:
The greater of
6.5% of the maquiladora’s operating costs or
6.9% of value of all assets in use in Mexico
Standards for issuing an APA are to be developed
What about taking into account US-owned assets?

39. Maquiladora Tax Regime – Special PE Exemption
New requirements for getting a PE exemption for a foreign principal (cont’d)
Impact of new limited choices to qualify – either safe harbor for taxable income or maquiladora APA
Satisfying safe harbor will often require transfer price unacceptable for principals in countries outside US
Mexico’s announced APA standards would pose the same problem
Solutions?
Try to get a bilateral APA to support PE exemption ?
Avoid the need for a special PE exemption
By transferring the M&E to the maquiladora?
By abandoning consignment manufacturing (and going to a buy sell model)?

40. Maquiladora Tax Regime – Special PE Exemption
New requirements for getting a PE exemption for a foreign principal (cont’d)
Plus new requirements added to the law as conditions for qualifying for that exemption
Expressed as a new definition of maquiladora operation for tax purposes
Re activities that a maquiladora may undertake
Income from “productive activity” must come from
the maquiladora operation (still being clarified)
Re ownership and prior ownership of machinery and equipment used in Mexico
with a new two-year grandfather clause for certain
maquiladoras with longstanding consignment
operations (previously unlimited)

41. New Conditions for Getting the Maquiladora PE Exemption
Previous Rules (in Maquiladora Decree)
Current Rules (in the New Income Tax Law)
Temporarily Imported Inventories
Generally to be owned by the foreign resident
Can be temporarily imported
Return abroad, including virtually
(Same)
Transformation or repair activities
Required on temporarily imported inventories
Includes product development
III. Activities of the maquiladora
Possible to have maquila production , non-maquila production and other non-maquila activities in the maquiladora company
New Limit on Activities of the
maquiladora
All income from “productive activities” shall be derive from the maquila operation
Further clarification required – a practical problem 41

42. New Conditions for Getting Maquiladora PE Exemption
Previous Rules (in Maquiladora Decree)
Current Rules (in the New Income Tax Law)
IV. M&E – ownership & prior ownership
At least 30% needed to be owned by foreign resident and not previously owned by maquiladora or Mexican related party
Any or all of the remaining 70% could be owned by the Maquila
Question on rules re prior ownership on foreign owned M&E in addition to that satisfying the 30% minimum
Grandfather provision ( exemption for maquiladoras complying with Article 216 BIS as of 12/31/2009) – exemption applied indefinitely
IV. M&E– ownership & prior ownership
(Same)
New grandfather provision under 12/13 Decree (exemption for maquiladoras complying with Article 216 BIS as of 12/31/2009) only applies through December 31, 2015 42

43. POSSIBLE CONSTITUTIONAL CHALLENGES
New M&E Based Conditions for Getting the PE Exemption
POSSIBLE CONSTITUTIONAL CHALLENGES
Retroactive application of a legal provision
Unfavorable retroactive effect exists when vested rights are deprived to a given company or individual
Article IV of the ITL is contrary to the Constitution, as it affects situations that happened under the terms of the previous text of the IMMEX Decree and the ITL
Violation to the Constitutional Principle of Equitable Application of the Law
The equitable principle refers to the equal protection right (i.e. non-discrimination)
Violation of the principle of "Competitiveness" addressed in the Mexican Constitution
New principle adopted by the Mexican Constitution
Necessary to demonstrate lack of competitiveness as a result of the new legal provisions
Violation of Fundamental Rights
Violation to the rights to have a net worth, coped with the violation of a retroactive application of the Law
Fringe benefits (gasto de previsión social no acumulable para el trabajador). Sólo será deducible el 47% 43

44. Maquiladora Tax Regime – PE Exemption for “Shelters”
Third party (i.e. unaffiliated) maquiladoras (commonly called “shelters”) are an important altenative
Consignment operations with a shelter company require a special PE exemption for the foreign company
Not commercially acceptable to rely on safe harbor or maquiladora APA to avoid a PE in a third-party situation
Solution has been an absolute PE exemption for a foreign principal dealing with a shelter (a third party maquiladora)
New limits on that solution under the new income tax law
A foreign company can only benefit from that absolute PE exemption for four years
Measured from later of 1/1/14 or date maquila begins manufacturing operations for the foreign company
After that, what? Establish consignment operations with an affiliated maquiladora? or

45. Maquiladora Tax Regime – Compensation Deductions
Compensation that is tax-free to the employees
New income tax law limits deductions to 53% of payments of such compensation (47% if the amount of such compensation has been reduced from the prior year)
Note – For a maquiladora that elects the safe harbor:
The limit on deductions does not affect its taxable income
It must meet a fixed taxable income threshold
Denial of deductions just reduces the amount it needs to receive for its processing services
Presidential Decree of December 2013 provides:
Special exemption for maquiladoras from new limitation on deductions for compensation that is tax free to the employee
Important for a maquiladora getting and APA

46. Maquiladora Tax Regime – Value Added Tax
Starting 1/1/15, VAT is payable on temporary imports of materials, components, machinery and equipment
Will also apply to auto manufacturers’ imports into their fiscal deposit regimes
New credit mechanism established to avoid cash payment of VAT, only for companies satisfying new certification requirements
Certification requirements published on January 2
Other trade benefits also available from certification
Starting 1/1/15,VAT will also be payable on foreign party sales of temporarily imported goods to a maquiladora
Immediate credit for a maquila that gets the certification
Law amended to eliminate supplier obligation to withhold VAT on sales to a maquiladora

47. Certification Rules – VAT and IEPS
Certification to avoid payment of VAT and IEPS in temporary importations
Three categories:
Application filed online with the company’s advanced electronic signature

48. Certification Rules – VAT and IEPS
40 days to issue certification
Cannot request certification within:
6 months when not complying with infrastructure requirements during the certification procedure
2 years when granted certification is cancelled

49. Certification Rules – VAT and IEPS
Benefits
Same as Category A, plus:
No immediate suspension of Importer’s Registry when falling into suspension cause
VAT refund in 10 days
Certification valid for 3 years
No audit in 60 days for self-assessment
Monthly consolidated pedimentos
No declaration of serial numbers in temporary import pedimentos (but in ICS)
Simplified ICS
(to be defined by Hacienda in Rules)
Invitation letter prior an audit
Exports clearance at company’s domicile
Category AAA
Same as Category A, plus:
VAT refund in 15 days
Certification valid for 2 years
No audit in 30 days for self-assessment
Invitation letter prior an audit
Category AA
Mechanism of tax credit for VAT/IEPS to be paid upon temporary importations
VAT refund in 20 days
Certification valid for 1 year
Category A

50. Certification Rules – VAT and IEPS
Requirements category A:
Inventory control system
Obtain a favorable opinion on tax compliance from Hacienda
Not be in the list of non-compliant companies, published by Hacienda
Have valid digital seals issued by Hacienda
All employees must be registered in Social Security
Evidence that the value of finished goods returned equal at least 60% (80% for sensible goods) of value of temporarily imported materials
Strict compliance with other tax, customs, IMMEX and labor obligations

51. Certification Rules – VAT and IEPS
Additional requirements category AA:
40% of Mexican operations are made with tax-compliant service providers / suppliers
More than 5 years under current regime or having at least 1,000 employees or M&E with a value of more than 50 million pesos (approx. 4 million dollars)
No tax assessments in the past 12 months or evidence that the tax assessment has already been paid
No negative resolutions of VAT refunds requested in the past 12 months

52. Certification Rules – VAT and IEPS
Additional requirements category AAA:
70% of Mexican operations are made with tax-compliant service providers / suppliers
More than 7 years under current regime or having at least 2,500 employees or M&E with a value of more than 100 million pesos (approx. 7.5 million dollars)
No tax assessments in the past 24 months or evidence that the tax assessment has already been paid.
No negative resolutions of VAT refunds requested in the past 12 months

53. Regional Tax Administration in Foreign Trade (ARACE)
Certification Rules – VAT and IEPS
Calendar to file application
Regional Tax Administration in Foreign Trade (ARACE)
 Period
Certified companies in accordance with Rule , paragraph L of the FTGR, and companies that operate under fiscal deposit for the assembly and manufacturing of vehicles.
April 1 to April 30 
Pacific North
April 15 to May 15
Northeast
June 3 to July 3
Central North
July 7 to August 7
Central
August 7 to September 8
West and South
September 22 to October 22

54. Certification Rules – VAT and IEPS
Essential compliance issues to avoid cancellation:
Comply at all times with certification requirements
Give notice of changes on corporate name, tax domicile, operative domiciles, shareholders and administration board
Give notice on change of carriers and of suppliers
Register companies involved in their virtual transfers
Allow inspections by customs authorities
Maintain Importer’s Registry in force
Evidence that temporarily imported goods were returned abroad, transferred or change of customs regime
Temporarily imported goods must be located in authorized domiciles
Evidence legal possession and importation of foreign trade goods
Not have pending tax assessments
Maintain IMMEX in force

55. Structuring Sales of Maquiladora Output Into Mexico
Direct transfers of maquiladora production in Mexico (without physical export first)
As before, must be accomplished using virtual pedimentos
Virtual exports for customs purposes continue to satisfy export requirements under the tax law
Virtual pedimentos available for sales with physical transfers to another maquiladora or automotive OEM
Use of virtual pedimentos for direct transfers of maquiladora output for sale to other customers in Mexico
Requires use of a separate service maquiladora
Requires the manufacturing maquiladora to have a NEEC certification
Based on safety and security requirements

56. Mandatory Profit Sharing (PTU) – Changes in the Base
Old Art. 16 repealed
New Art. 9
Profit sharing base is now equal to taxable income (except no deduction for PTU and no reduction by NOLs)
Recognizes inflation
Dividends are not included in the base
Foreign exchange effect based on accrued amounts.
Special profit sharing base, different from taxable income
Did not include inflation adjustments.
Dividends received were in profit sharing base
Special rule for taking foreign exchange losses into effect (amount due not amount accrued)
¿Better or worse? It depends.

57. New Administrative Requirements and Procedures
Auditor’s tax opinion (dictamen fiscal)
Law amended to eliminate obligation to obtain a dictamen fiscal
Electing to get a dictamen fiscal to avoid other reporting obligations to the government
Now only for companies with at least 100 million pesos of taxable income
Electronic invoicing
Generally starting in 2014
Alternatives eliminated
Most large companies already required to use electronic invoicing.

58. Electronic accounting
New Administrative Requirements and Procedures
Electronic accounting
Effective July 1, 2014, all taxpayers must periodically provide all accounting records electronically to the tax authorities.
Standardization of accounting
Rules to be issued on the form of accounts to be submitted
Tax electronic mailbox
Now the taxpayer can choose the alternative of receiving all notices electronically from the tax authorities .
Enforceable obligation to do so in June 2014 for companies and the following year for individuals.
Also the way to claim refunds.

59. New Administrative Requirements and Procedures
Reviewing process
New right of the authorities as of July 2014 to conduct electronic reviews and issue pre-assessment electronically
Without prior notice to the taxpayers.
Preassessment becomes final if taxpayer does not respond
Settlement of a tax controversy during the review process using installment payments.
Seizure of bank accounts
Only for an amount equivalent to the updated tax liability
Eliminated ability to freeze accounts in excess of that amount

60. Tax authorities’ non-disclosure obligation
New Administrative Requirements and Procedures
Tax authorities’ non-disclosure obligation
Possible to publish the name and ID of a taxpayer only in the following scenarios
Determined and unpaid tax liabilities.
Taxpayer is not localizable.
Conviction for a tax-related criminal conduct.

61. Thank you John A. McLees Baker & McKenzie, Chicago
Manuel Padron
Baker & McKenzie, Juarez
Mounia Benabdallah
Baker & McKenzie, New York