On May 18, 1994 Mexico became the 25th member of the Organization for Economic Co-operation and Development (OECD); on July 5 the same year, a decree was published on the official daily gazette, that stated that certain obligations as a new member of the OECD where accepted by Mexico.
Effective 1997, certain articles were included in the Income Tax Law that bind taxpayers who engage in related party transactions to determining their gross income and allowable deductions for those transactions, by considering market prices for this type of transactions for the foregoing transactions.
These provisions take into account some concepts set forth by the OECD in transfer pricing matters.
In accordance to the ITL two or more persons are considered related parties when one participates DIRECTLY or INDIRECTLY:
• in the management,
• or capital
Of the other person.
Taxpayers that engage in related party transactions have the obligation of obtaining and proving that the operations held with their related parties where held at fair market value, through the elaboration of a Transfer Pricing Study.
As you can see the term related party is very wide, thus for, we invite you to analyze all your operations with sister companies as well as related, to make sure we are in full compliance of these regulations, not complying with these regulations would only result in unnecessary penalties, surcharges as well as tax liabilities for the company issued by the Tax authorities.
We are at your service to attend any questions or doubts with regards to the present matter specifically in your company.
MSST Consulting Limited Liability Partnership