Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Mexico

Mexico has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) except the timely exchange of information on future rulings (ToR II.5.6). Mexico experienced significant delays in exchanging information on future rulings. Mexico is recommended to ensure that all information on future rulings is exchanged as soon as possible.

Mexico can legally issue two types of rulings within the scope of the transparency framework.

In practice, Mexico has issued 13 past rulings; for the period 1 April 2016 - 31 December 2016, Mexico issued one future rulings; and for the year in review, Mexico issued 328 future rulings within the scope of the transparency framework.

Peer input was received from one jurisdiction in respect of the exchanges of information on rulings received from Mexico. It was positive, noting that information was complete in a correct format and received in a timely manner.

Introduction

886.  This peer review covers Mexico’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

887.  Mexico can legally issue the two following types of rulings within the scope of the transparency framework: (i) cross-border unilateral advance pricing arrangements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; and (ii) permanent establishment rulings. In Mexico, rulings are issued either by the Large Taxpayer’s Legal Affairs and Transfer Pricing offices or by the Oil and Gas Legal Affairs office. Rulings (other than APAs) can be published in a redacted summarised form.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

888.  For Mexico, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

889.  In the prior year peer review report, it was determined that Mexico’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. Mexico’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

890.  For Mexico, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

891.  In the prior year peer review report, it was determined that Mexico’s implementation of a system to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard. Mexico’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Review and supervision mechanism (ToR I.4.3)

892.  In the prior year peer review report, it was determined that Mexico’s review and supervision mechanism was sufficient to meet the minimum standard. Mexico’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

893.  Mexico has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

894.  Mexico has the necessary domestic legal basis to exchange information spontaneously. Mexico notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

895.  Mexico is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) double tax agreements in force with seven jurisdictions, and (iii) tax information exchange agreements in force with three jurisdictions.1

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

896.  In the prior year peer review report, it was determined that Mexico’s completion and exchange of templates were sufficient to meet the minimum standard. Mexico notes that internal guidelines have been issued in order to regulate the way to proceed when information within the scope of the transparency framework is exchanged.

897.  During the year in review, Mexico experienced a significant increase on the number of rulings issued, after having reached an agreement with the United States on applying a standard transfer pricing methodology for certain similar types of cases and which allowed the decision-making on granting those types of rulings to be much faster. As a result of the increase in volume of rulings issued, Mexico experienced delays in exchanging information on future rulings. However, it is noted that the United States was already aware of the methodology used to solve these cases, as well as of the taxpayers in Mexico and in the United States that qualified for these kind of agreements. Mexico is in the process of finding the most efficient way to exchange this information in order to meet the exchange timelines. Mexico is recommended to complete all outstanding exchanges of information as soon as possible.

898.  Mexico notes that the summary section is completed by tax administration officials according to information provided by taxpayers when filling in APA’s and ruling requests. It is noted that guidelines may be modified to make them consistent with FHTP’s internal suggested guide in the near future.

899.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	N/A	0	N/A
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	0	3281
Total	0	0

1. This number represents the number of future rulings on which exchanges would be required. Once the exchanges have been completed, the statistics on the number of exchanges, which may be different from the number of rulings, will be updated.

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	1	30 days	N/A

Conclusion on section B

900.  Mexico has the necessary legal framework and administrative process in place for exchanging information on rulings. Mexico has met all of the ToR for the exchange of information process except the timely exchange of information on future rulings (ToR II.5.6). Mexico is recommended to ensure that all information on future rulings is exchanged as soon as possible.

C. Statistics (ToR IV)

901.  As no information on rulings was exchanged for the year in review, no statistical data can be reported.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

902.  Mexico does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Mexico experienced significant delays in exchanging information on future rulings.	Mexico is recommended to ensure that all information on future rulings is exchanged as soon as possible.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Note

← 1.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm . Mexico also has bilateral agreements in force with Austria, Canada, Hong Kong (China), Russia, South Africa, Ukraine and the United States. In addition, Mexico has Tax Information Exchange Agreements permitting spontaneous exchange of information with Aruba, Canada and the United States.