Final considerations when preparing the annual tax return WMTA - March 18, 2009 ©2009 Deloitte LLP....

Final considerations when preparing the annual tax return

WMTA - March 18, 2009

©2009 Deloitte LLP. All rights reserved.

Income Tax



Exchange differences

Intercompany accounts receivable are generating exchange gains

Exchange gains are not part of the profit when computing the taxable income based on a Transfer Pricing study thus increasing the income tax liability.

Alternatively the possibility of paying a dividend to cancel the account receivable must be evaluated.


Exchange differences/ thin capitalization

By Law exchange differences are deemed as interests.There is a limitation to deduct interests provided that liabilities do not exceed the 3/1 ratio of debt/equity.

Companies with large intercompany account payable will report exchange losses and subject to this limitation.

An option to explore is to consider the possibility of capitalizing part of the intercompany debt.


Profit sharing as part of the operating expenses

Taxable Income is computed upon the total operating expenses according to the Mexican GAAP.

Now NIF (Normas de Interpretación Financiera) are in force no longer GAAP.

NIFs have no definition of operating expenses, therefore not clear that the Employee´s profit sharing is part of the operating expenses to compute the mark up for tax purposes.

Our understanding is that the EPS is not an operating expense; although the minimum effect in the tax reconciliation will have no major exposure if reported as operating expense.

Value Added Tax



Import / export reporting

Import of intangible goods

Export of intangible goods

Use of services in National Territory or abroad.

Flat Tax



Identify remmitances of money to capital investments

To pay operating expenses

For capital expenditures


Value of income and expenses

Keep control over the expenses in foreign currency to claim as a deduction the total expenditure and not the booked expense

Final considerations when preparing the annual tax return WMTA - March 18, 2009 ©2009 Deloitte LLP....

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