Mexican Position on Offshore Tax Havens

Mexican Position on Offshore Tax Havens. Mexico views offshore tax havens as follows:

  • Effective January 1, 2005, the rules governing investments in Mexican preferential tax regimes (“Los Regímenes Fiscales Preferentes”) have been amended.
  • Such changes have broadened the tax and reporting consequences of holding assets outside of Mexico and eliminating many of the planning opportunities that were available under the “old” blacklist regime.
  • It is our understanding that under the Mexican tax reform foreign-source [namely, non-Mexican source]:

(a) Income of any kind derived from blacklisted jurisdictions is now reportable; and

(b) Furthermore, even if the income is not derived from a blacklist source, if the income is passive (namely, (i.e. dividends, interest, royalties and capital gains)) and (i) if it is not subject to taxation abroad or (ii) if it is subject to an income tax that is less than 75 percent of the income tax computed under Mexican tax legislation, then the investment will be deemed to be in a low-tax jurisdiction.

  • Taxpayers earning income from a preferential tax regime must file an information return in February of each year. Failure to file the return is subject to a CRIMINAL penalty that ranges between three months and three years imprisonment.

NOTE: It is possible under the new rules that a country that is not typically classified as a tax haven might fall under the less-than-75% rule. For example, the U.S. does not tax interest and capital gains on non-realty investments of foreign nonresidents and U.S. source income appears to be subject to this new 75 percent rule.

CAUTION: As California attorneys NOT qualified to practice law in Mexico, we recommend that you rely on your Mexican counsel to discuss the above Mexican laws.