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  • In 2008, Mexico enacted and incorporated into its legal system what could be interpreted as the principle of substance over form. This ‘simulation rule’ applies only for tax purposes, and through it the tax authorities are now empowered to impose taxes as per the economic reality of an operation rather than the tax consequences that would apply to the way it was formally presented by the taxpayers.
  • During 2008, Mexico enacted a new ‘Flat Tax system’ (‘Impuesto Empresarial a Tasa Única’ or IETU), which is intended to work as a complementary tax vis a vis the general income tax in Mexico. The current tax rate for this IETU is 17.5 per cent from 2010 onwards.
  • An important issue in terms of precedents took place during 2009, when the first constitutional reliefs lawsuits in connection with the Mexican controlled foreign companies (CFC) regime (the rules regarding ‘Regimenes Fiscales Preferentes’ of the Income Tax Law) were decided by the Supreme Court, and in all cases it was clear that the Court upholds the constitutionality of the complete set of rules.
  • During 2009 and 2010, Mexico has been very active in negotiating and signing various tax information exchange agreements (TIEAs) with many jurisdictions that used to be considered ‘tax havens’, as well as amending the exchange of information clause contained in many of the existing double taxation agreements (DTAs) that were already in force. Of these we can mention the signature of tax agreements with the Bahamas, Bermuda, Barbados, Curacao, Panama, Uruguay. Many more are still under negotiation.

1. Introduction

a. History and background

Mexico is currently the 13th largest economy in the world (11th if considered by purchasing power parity standards). It is also the only member of the OECD from Central and South America.

Mexico is a federal republic with a so-called growing democracy, after having been ruled by only one party for over 70 years, with little room for democracy and citizen involvement in social matters until the year 2000, when for the first time in modern history, an opposition party won the elections for Presidency.

Mexico’s geographical and commercial links to the United States and its strong dependency on income derived from oil exports mean that it was very badly hit by the recent world financial crisis. Its macroeconomic statistics seem to be stabilising, however, and the outlook for economic recovery is improving.

b. Legal system

Mexico’s legal system is based on the civil law, following the model of the Napoleonic code, but also influenced by Roman legal legacy for many of its institutions. The powers in Mexico are divided between a Judiciary, a Legislative and an Administrative department; each one working under an Assembly of representative Deputies and Senators, a Supreme Court and a President, respectively.

Being a federation, Mexico has one Constitution and each of the 32 states have their own (which is subject to the federal Constitution). Therefore, Mexico regulates most of its affairs on at least two levels, the general federal level and the lower state regulation level. Administrative regulations normally fall within the lower administrative units.

Editorial Board
Mauricio Cano del Valle
Amicorp Group


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