May 3 — Mexican companies aggressively shifting profits within their corporate structure for tax reasons should soon expect a knock on the door from Mexico's tax administration.
Oscar Molina, general administrator of the Large Taxpayers Unit for Mexico's Tax Administration Service (SAT), said in an interview with Bloomberg BNA that SAT officials are ready to discuss the tax structures of 270 companies as the nation moves to the implementation phase of the international project to combat tax base erosion and profit shifting led by the Organization for Economic Cooperation and Development.
Mexico, as one of the first nations to implement BEPS, has begun requiring additional worldwide financial information from Mexico-based companies, including an overview of the company's global operations, organizational structure, supply chains, intangibles and aggregated financial and tax information for all tax jurisdictions.
While companies won't be required to file this information until Dec. 31, 2017, the new requirements have already helped an agreement to be reached with three of the largest multinational corporations that were out of compliance, Molina said .
The international nature of the BEPS initiative has made it easier for the tax administration to take on big companies' aggressive tax strategies, Molina said, both because of the financial information to come through country-by-country reports and the message that transparency is the new norm worldwide.
“In Mexico we are very respectful of the multinational corporations that operate here and did not want to initiate anything unilaterally,” Molina said. “The OECD told us they were developing new rules, and they also told us that we were correct in our interpretation of substantive economic activity and the tax implications of it. This would mean taking on the aggressive tax positions of some of these companies.”
While Molina hopes that the three companies will show others that the era of tax avoidance through complex corporate structures is coming to an end, the tax administration's side plans to continue to gear up to make sure it has the needed staff and expertise to ensure the new standards are being enforced.
“Now comes the most important part of the BEPS initiative—its enforcement,” Molina said. “The challenge will be how quickly Mexico can implement these new rules. This also depends on the OECD and the modifications it makes to the rules and how quickly these are issued.”
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