This alert relates to earlier Legal Alerts 18 and 23, on the rules for filing the information returns referenced in Article 76-A of the Mexican Income Tax Law (MITL).
On 21 September 2017, the Office of the Taxpayer Ombudsman (PRODECON, for its initials in Spanish) posted on its website the filing instructions and Frequently Asked Questions on the transfer pricing information returns: master file, local file and country-by-country report.
These documents were developed and drafted jointly by the Tax Administration Service (SAT) and PRODECON, following the commitments and activities deriving from feedback on the public consultation held on the rulemaking regarding the filing of the transfer pricing information returns prescribed under Article 76-A of the MITL. Note that both the filing instructions and FAQs are presented in "draft" form, and may undergo subsequent modifications accordingly.
In addition to the filing instructions and FAQs, the SAT informed PRODECON that it expected the technological platform for taxpayers to report and send their information to be released during the last week of October of this year. If that is the case, no extensions are foreseen to comply with these new tax obligations.
Local File Information Return Filing Instructions
This document is intended to provide the taxpayer with the information requested on the information return form, while providing guidance to facilitate the completion of the required data. The sections of the local file information return on related parties will consist of the following categories:
- General data
- Information and supporting documentation
The information and supporting documentation section will include two sections for electronic files to be attached (in Excel and PDF format). One of the documents requested in this section is the information and documentation on the arm's length nature of related-party transactions.
Master File Information Return Filing Instructions
This document describes the information to be completed in the sections of the return:
- General data
- Organizational structure
- Overview of the business activity of the MNE group
- Intangibles of the MNE group
- Financial activities
- Financial and tax situation
As provided in Rule 3.9.15 of the Miscellaneous Tax Rules for 2017 (MTR), the master file information return may be filed in English or Spanish. This specification (filing language) must be indicated in the general data section of the return.
One of the benefits offered by this return will be the practicality of attaching a file with information to complement each line item. If the file meeting the prescribed requirements is provided, it will not be necessary to fill out the other sections, except for the section entitled "Clarifications."
Country-by-Country Information Return Filing Instructions
The contents and characteristics of the country-by-country information return include the following sections:
- General data
- Designated - required to file
- List of company names
- Additional information
To complete this return, the type of filer must be indicated: taxpayer required to file, designated filer, filing required by the tax authority, or other. The filer should also indicate the section of Article 32-H of the Federal Tax Code under which it is required to file the return.
Pursuant to Rule 3.9.14 of the MTR, the country-by-country return may be filed in a currency other than Mexican pesos. The form will have a section in which the taxpayer must indicate the currency in the which the return is filed.
Frequently Asked Questions on Annual Information Returns: Master File, Local File and Country-by-Country
This 18-page document contains a series of questions and answers, categorized as follows:
- BEPS Action 13 - Frequently Asked Questions and Guidance on the Implementation of the CbC Report from the OECD Website
This section contains an unofficial Spanish translation of the information found at the following links on the OECD website:
- Taxpayers' Frequently Asked Questions in México
In this section, the FAQs are aimed at answering questions on the confidentiality of information, specifications with respect to the information requested on the returns (e.g., exchange rate, figures to be reported, type of tax reported), and doubts as to which taxpayers are required to file the information returns, among other things.
General Observations on the Filing Instructions
With respect to the master file and country-by-country information returns, both forms will have a section in which the taxpayer may specify whether the return is to be filed after December 31, if the foreign entity's fiscal year does not match the calendar year (Rule 3.9.14 of the MTR), in which case the return will be sent without completing the sections for subsequent filing. Likewise, under Rule 3.9.13 of the MTR, both returns may be filed individually or jointly. If filed jointly, a specific field will be opened where the filers will enter the names and taxpayer identification numbers (RFCs) of the Mexican taxpayers included on the returns.
To access the information returns, the taxpayer should enter the SAT's website and log in with its RFC, e-signature or password, as indicated on the forms described above.