On August 6, 2014, the Mexican Congress approved some of the secondary legislation related to the so-called Mexican Energy Reform. The approved laws were published in the Mexican Official Gazette on August 11, 2014. Among the approved secondary legislation is the Hydrocarbons Revenues Law, which includes: (i) special tax provisions for governmental and nongovernmental entities entering into agreements for the extraction and exploration of hydrocarbons; and (ii) a new hydrocarbons tax applicable to these entities.
The most relevant special tax provisions are:
- Special depreciation yearly rates applicable for assets and investment for the exploration and extraction of hydrocarbons, such as: (i) 100 percent depreciation rate for investments made for the exploration activities; (ii) 25 percent depreciation rate for investments made for the development and extraction of oil and natural gas; and (iii) 10 percent depreciation rate for investments made for the warehousing and transportation activities that are indispensable to complying with the agreements.
- Specific rules dealing with the way in which several entities participating as a "consortium" (for the exploration and extraction of hydrocarbons) could identify its accruable income and authorized deductions to calculate individual income tax.
- A tax loss carry-forward term of 15 years (the general carry-forward period provided in the Mexican Income Tax Law is 10 years), for those taxpayers that carried out activities in maritime zones with a flow depth greater than 500 meters.
- A special 0 percent valued tax rate applicable for transactions related to the exploration and extraction of hydrocarbons.
- Rules for the creation of permanent establishments in Mexico when foreign entities perform activities related to the exploration and extraction of hydrocarbons.
The most important features of the hydrocarbons tax are:
- The taxpayers are governmental and nongovernmental entities entering into agreements for the extraction and exploration of hydrocarbons.
- The tax is calculated on a monthly basis and will be calculated by applying the following rates to each square kilometer in which the exploration and extraction of hydrocarbons takes place: (i) Mex$1,500 (approximately US$115) for each square kilometer used in the exploration phase; and (ii) Mex$6,000 (approximately US$460) for each square kilometer used in the extraction phase. These rates will be adjusted by inflationary effects on January 1 of every year. The tax return for this tax should be filed no later than the 17th day of the following month corresponding to the payment of the tax.
- In case it is impossible to explore or extract hydrocarbons, the taxpayer must justify the impossibility in order to obtain an exemption for paying the hydrocarbons tax from the Mexican tax authorities.