Mexican tax rule change to reveal previously hidden accounts: report

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A recent change to Mexico’s existing tax regime has eliminated key exemptions under which Mexican taxpayers previously were able to avoid the need to report certain offshore investment accounts, Baker & McKenzie is reporting.

Individuals with investments held in investment vehicles affected by the exemptions should look into whether they are likely to be affected, and if they are, take necessary action, the Chicago-based, international law firm said, in an update published on its website.

“In our view, a relevant number of structures are now reportable under these amendments and thus, it would be important to review the specific structures to confirm if reporting has been triggered, in which case, the filing of the informative return would need to be made in February 2017,” Jorge Narváez-Hasfura, a tax principal with Baker & McKenzie Abogados in Mexico City, told International Investment.

“Criminal penalties would be triggered upon failing to report.”

According to the Baker & McKenzie report, the amendment to the Mexican Administrative Guidelines (Miscelanea Fiscal) had been triggered by the recent global focus on tax evasion, and such measures as the OECD’s automatic exchange of information scheme, the Common Reporting Standard, which Mexico and some 53 other nations are preparing to adopt by 2017.

The concern of Mexico’s tax authorities over the US “not participating in the exchange of tax information through the Common Reporting Standard” was also a consideration, Baker & McKenzie said.

As reported, the US has said it doesn’t see the need to sign up to the CRS immediately, as it already has its own global information disclosure programme in place, the Foreign Account Tax Compliance Act.

US Internal Revenue Service commissioner John Koskinen has been quoted as saying that although it made “sense for [the IRS] to move” in the direction of participating in the Common Reporting Standard, Congressional approval would have to be obtained first.

No longer exempt

According to the Baker & McKenzie report on the recent Mexican tax amendment, the types of offshore investments that used to be exempt from reporting for tax purposes – until the Miscelanea Fiscal amendment removed them – were “direct and indirect investments maintained in blacklisted jurisdictions that have in force a Tax Information Exchange Agreement with Mexico, and investments carried out in any jurisdiction through fiscally transparent entities”.

To read the Baker & McKenzie report, click here.