February 16, 2018 Mexico modifies transfer pricing deadlines for filers of DISIF Taxpayers should be preparing their transfer pricing information now to meet the March 31 filing deadline. Mexico has incorporated recent tax developments into its tax legislation, which include changes to the due date for the Tax Situation Information Return (Declaración Informativa sobre Situación Fiscal or DISIF) and deadlines to file some of the transfer pricing returns for fiscal year (FY) 2017. Specifically, Mexico changed the due date for the DISIF to the same due date for the annual tax return under Article 32-H of the Mexican Federal Tax Code (MFTC) for FY2017, which is no later than March 31. This change is relevant because, until FY16, both the DISIF and the transfer pricing information return related to intercompany transactions with foreign related parties (Exhibit 9 of the Declaracion Informativa Multiple (DIM)) could be filed until June 30, 2017. For FY2017, however, the MFTC and administrative rules provided by the Mexican tax authorities (SAT) have been aligned and now establish that taxpayers that have exercised the option to file the DISIF must do so no later than March 31. The administrative rules, however, still allow taxpayers that file the Statutory Tax Audit Report (Dictamen Fiscal) to file Exhibit 9 of the DIM until July 15 or July 31, 2018 (provided all contributions are paid by July 15). The other TP obligations in Mexico are still valid and did not change in terms of content or dates of preparation or submission (e.g., TP documentation, BEPS1 statements: local information return, master information return and country-by-country information return). Background Statutory Tax Audit Report vs Tax Situation Information Return (DISIF) Statutory Tax Audit Report2 The Statutory Tax Audit Report (Tax Report) is a report issued by a Certified Public Accountant (CPA) in which the CPA makes a tax compliance pronouncement about the taxpayer's fiscal situation on a yearly basis based on current tax rules. Such report may only be issued by CPAs previously authorized by the SAT, and taxpayers must file with the SAT on or before July 15 of each year or July 30, when all contributions are paid by July 15. Mexican taxpayers may engage an external auditor to prepare a Tax Report, which must be filed on the aforementioned dates. Taxpayers meeting the following criteria may file the Tax Report: — Have aggregate prior-year revenues over MXN $109.9 million — Have total assets over MXN $86.8 million — Have 300 or more employees or — Are controlled by another company (Mexican or foreign) that falls under one of the three previously mentioned criteria Taxpayers that have exercised the option of filing the Tax Report do not have to file the DISIF. The due date for filing the Tax Report is no later than July of the year following the fiscal year in question. Tax Situation Information Return (DISIF)3 The DISIF is a report prepared by the taxpayer (or a third-party advisor) in which tax compliance information is disclosed. The taxpayer must file the DISIF together with its tax return with the SAT on or before March 31 of each year.4 Mexican companies meeting any of the following criteria must file the DISIF: — Have aggregate prior-year revenues over MXN $708 million or hold shares in the public stock exchange — Report under the optional tax regime for groups of companies, under Title II, Chapter VI of the Mexican Income Tax Law — Are parastatal entities (i.e., entities that serve the government) of the federal public administration — Have a permanent establishment in Mexico for a foreign resident — Conduct transactions with foreign-based related parties Mexican resident companies performing transactions with foreign residents may choose not to file the DISIF if the transactions were lower than MXN $100 million. 5 For FY16, taxpayers had to file the DISIF no later than June 30, 2017. TP due date changes DISIF Article 32-H of the MFTC, in force for FY 2017, states that taxpayers filing the DISIF must file it along with the annual tax return by March 31 of the year following the fiscal year-end. The new due date represents a significant change in the filing due dates of the DISIF and Exhibit 9 of the DIM, because for FY 2016, both had to be filed by the end of June. As of February 15, 2018, the SAT has not issued any official pronouncement related to a possible extension of the DISIF filing date. Therefore, taxpayers must begin to prepare all of the necessary information to ensure compliance. Penalties for non/partial compliance related to intercompany transactions range from MXN $12,080-$120,760. BEPS returns Article 76-A of the Mexican Income Tax Law requires certain taxpayers to file with the SAT the following annual returns in force since 2016: — Master file (in English or Spanish) — Local file (in Spanish) — Country-by-country report (CbCR) Local and master file returns6 The local and master file returns apply only if the taxpayer meets one of the provisions indicated in Article 32-H, Sections I, II, III and IV of the MFTC and carry out transactions with related parties. Such provisions are: — Have aggregate prior-year revenues over MXN $708 million or hold shares in the public stock exchange — Report under the optional tax regime for groups of companies, under Title II, Chapter VI of the Mexican Income Tax Law — Are parastatal entities (i.e., entities that serve the government) of the federal public administration — Have a permanent establishment in Mexico for a foreign resident The deadline for complying with filing the local file and master file is December 31 of the year following the fiscal year in question. CbcR Taxpayers must file the CbCR if they have consolidated income for accounting purposes that is equal to or greater than MXN $12 billion in the immediately preceding fiscal year. The SAT has not issued any formal notification requirements with respect to the CbCR. The legal framework considers that a taxpayer has complied with the notification requirement when a designated Mexican taxpayer files the CbCR. For 2016, Mexican subsidiaries that complete a questionnaire as an appendix to the DISIF (due on June 30, 2017) and the Tax Report (due on July 31, 2017) will be deemed as notifying the SAT as to whether the ultimate parent entity will be filing the CbCR of the multinational enterprises. Next steps The DIM, the transfer pricing documentation and the DISIF must be filed in conjunction with the annual tax return no later than March 31, 2018; if the taxpayer opts to file the Tax Report, however, the taxpayer may prepare the documentation no later than July 15 or July 30 of the year following the fiscal year in question. Regarding BEPS returns (i.e., local file, master file and CbCR), certain taxpayers must prepare and review the information to be included on the returns so that they can file them no later than December 31, 2018. For those items that cannot be disclosed, legal alternatives should be explored, given the penalties for partial compliance. ———————————————
——————————————— 1 Base Erosion and Profit Shifting, as defined by the Organisation for Economic Co-operation and Development 2 MFTC, Article 32-A and Rule 2.13.2 of the 2017 MTR. 3 Article 32-H of the MFTC. 4 Sixth resolution of modifications to the 2017 MTR Rule 2.20.6. 5 According Rule 2.19.4 of the 2018 MTR published in the DOF on December 22, 2017, taxpayers that must file the DISIF may choose not to submit it when the total amount of transactions carried out with foreign residents during the fiscal year is lower than 100 million pesos. 6 Applicable only if they are indicated in Article 32-H, Sections I, II, III and IV of the MFTC performing transactions with related parties. | |||||||||||||||||||||
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