The Mexican government, through its Tax Administration Service, has released a preliminary framework for fiscally transparent trusts focused on energy and infrastructure investments. The tax treatment of such "Energy and Infrastructure Trusts" is similar to that of FIBRAs (Mexican Real Estate Investment Trusts) and follows the efforts of the Mexican government to attract investment in the Mexican energy and infrastructure industries.
Under the administrative framework, an Energy and Infrastructure Trust must be incorporated under Mexican law, and its purpose must be to invest in Mexican legal entities that are wholly owned by persons or entities resident in Mexico for tax purposes. In addition, its business activities must be exclusively focused on one or more of the following:
- Midstream (oil and gas transportation, storage, commercialization, refinement or gas liquefaction, compressing, and regasification) and downstream (processing of petroleum-based products and refinement of petroleum-based products). The Mexican legal entities in which the Energy and Infrastructure Trust invests cannot perform any activities related to the sale of hydrocarbons to the public or to any upstream activities (exploration, drilling, and production).
- Generation, transmission, or distribution of electricity.
- Infrastructure projects implemented through concessions, service agreements, or any other contractual scheme, as long as they are entered into by and among the public sector and private entities, are operational and have a remaining contractual life of at least seven years, and engage in any of the following areas: (i) roads, highways, railways, and bridges; (ii) city transportation systems; (iii) ports, industrial docks, and terminals; (iv) public airports; (v) development of the telecommunications system; (vi) public safety and social rehabilitation; and (vii) potable water, drainage, and water treatment.
- Administration of Energy and Infrastructure Trusts.
If all the specific requirements described in the preliminary administrative framework are met, the following tax treatment would be available (among other things):
- The Energy and Infrastructure Trust itself would not pay Mexican corporate income tax;
- Distributions to equity holders would be subject to a withholding tax;
- Income tax triggered on the contribution of land, fixed assets, and deferred expenses related to the energy and infrastructure activities by a Mexican legal entity to the legal entity performing the activities would be deferred;
- The Mexican entities may not withhold the 10 percent income tax on the distribution of dividends made to the Energy and Infrastructure Trust; and
- The Energy and Infrastructure Trust would be relieved from filing monthly income tax returns.
According to the preliminary legal framework issued by the Mexican Tax Administration Service, the regulation of Energy and Infrastructure Trusts would be effective as of October 1, 2015. However, such regulation is yet to be approved and is still subject to change before its publication in the Mexican Official Gazette.