GlobalAutoTV
Click to watch Wim van Acker -
Click to watch Wim van Acker -
latin resources

Need an office in Mexico or Brazil? Office suites, meeting rooms, virtual offices, network access



free downloads
LATIN AMERICA: "Autos: Brazil Demand Declines Accelerate in October (2015)" report

LATIN AMERICA: "Autos: Brazil Demand Declines Accelerate in October (2015)" report. 5-page report by BAIRD.

proceed to download
eJournals




back to index backLATINtalk January,  2006


Mexico Tax Alerts: Authorities Clarify Definition of "Business Profits"

The Mexican tax authorities issued guidance on 29 August 2005, clarifying that the concept of "business profits" included in Mexico's tax treaties should be understood to refer to income derived from the performance of activities described in article 16 of the Federal Tax Code. Such activities include commercial, industrial, agricultural, stockbreeding, fishing and forestry activities.

The new guidance, which is included in the fourth amendment to the Resolución Miscelánea or Administrative Rules, lays to rest the storm of controversy over the revised definition of "business activities" in the 2005 Mexican income tax reform. The revised definition of "business activities" gave rise to serious concerns in the tax community - in particular, for residents in countries that have concluded a tax treaty with Mexico - that the new rules would effectively override Mexico's tax treaties.

The 2005 reform measure excludes from the definition of business activities (for purposes of the source rules in Title V of the Mexican Income Tax Law (MITL)) specific types of income received by nonresidents that previously would have been exempt from withholding tax if the income qualified as business profits under an applicable tax treaty.

The effect of the rules is that (absent a permanent establishment in Mexico to which the income was attributable), none of the income specified in Title V would be considered as derived from business activities and, therefore, the income could be subject to full Mexican withholding tax at a rate of 25%, even if the recipient is resident in a country that has concluded a treaty with Mexico.

It is possible that the real intent of the 2005 reform measures may have been to define "business profits" (even though income derived from business activities is not necessarily the same as business profits) to exclude any of the types of income covered by Title V (i.e. dependent and independent personal services, royalties, technical assistance fees, capital gains, interest, etc.). This clearly would have given rise to a treaty override.

The new guidance makes it unnecessary to refer to the business activities definition in the 2005 reform -- now reference may be made directly to what activities are deemed to give rise to business profits under the Federal Tax Code. For example, if a technical assistance payment is made to a resident of a tax treaty country on the basis that technical assistance was rendered by the resident in the treaty partner country (absent a permanent establishment in Mexico), the income related to the payment will be subject to taxation only in the country of residence under article 7 of the relevant tax treaty.

Source: Deloitte Mexico - GAI

previous page

go top
search our site


Loading

LATINtalk

Other articles from the same issue (January,  2006).

Mexico Holding Its Own in 2005
play read on

Latin American Benchmarks Are Route To Better Logistics Performance
play read on

Riding The Wave
play read on

Brazil -- yes, Brazil -- is an emerging role model
play read on

Brazilian start-up offers minicar for land of SUVs
play read on

Language training in Spanish and Portuguese for global managers on the move in Latin America
play read on

Analysis: Decisive year for Latin America
play read on

Brazil Is no Friend of Business
play read on

Mexico: Asia taking advantage of more supplying
play read on

Mexico: GM spends US$2 billion in Southeast Region
play read on

Mexico Tax Alerts: Authorities Clarify Definition of "Business Profits"
play read on

East Meets West, With An Argentine Twist: More Argentines Are Embracing Chinese Language and Culture
play read on

Brazil Created Most Jobs in a Year in September
play read on

Country Industry Forecast - The Brazilian Automotive Industry – US $ 795
play read on

Brazil: Benefit Survey 2004
play read on

Relocating to Latin America
play read on

Is your business getting “Lost in Translation”?
play read on


Our Free eJournals
GlobalAutoExperts

To visit GlobalAutoExperts Directory, click here.


©2008 GlobalAutoIndustry.com | HCI Group, Ltd.
101 West Big Beaver Road, Suite 1400 | Troy, MI 48084 USA
USA Tel: +1.248.687.1060 | USA Fax: +1.248.927.0347
Fax UK: +44.(0)845.127.4765 | Fax Europe: +31.20.524.1659 | Fax Asia: +852.3015.8120