United States

Advance pricing agreement may be better alternative for Maquiladoras

WHITE PAPER

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The 2014 Mexican tax reform enacted by the Mexican Congress in October 2013 has numerous unfavorable provisions for Maquiladoras. As a result, beginning in 2014, many Maquiladoras will see an increase in their Mexican income tax liability. Proper planning, including changes to transfer pricing studies that may affect foreign related parties, is necessary to avoid considerable increases to Mexican tax. Some Maquiladoras will have to file an election with Mexico’s tax authorities by June 30, 2014.

In this whitepaper, authors Edgar Lopezlena and Mario Montemayor discuss the current tax environment for Maquiladoras in Mexico, ways to mitigate increased income tax liability under the 2014 reforms, and the consequences of failing to meet Mexican transfer pricing requirements. U.S. companies that own Maquiladoras should carefully develop a strategy to navigate the new rules.

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