Transfer Pricing 2025 Comparisons

In Mexico, the transfer pricing regime is robustly regulated through a comprehensive legal and administrative framework, comprising laws, regulations, normative criteria and administrative rulings. The following is a summary of its key sources and applicable rules.

Laws (Statutes)

The Income Tax Law (LISR) serves as the cornerstone of the transfer pricing regime. Specifically, Articles 76, 76-A, 179 and 180 establish the formal and substantive obligations for taxpayers conducting transactions with related parties, whether domestic or foreign. These provisions explicitly incorporate the arm’s length principle and empower the tax authority to adjust income or deductions when agreed prices fall outside the range that would have been negotiated between independent parties under comparable conditions.

Additionally, Article 76-A of the LISR mandates the preparation of supporting documentation (local file, master file, and country-by-country report) for certain taxpayers and imposes penalties for non-compliance.

Regulations and Secondary Provisions

The LISR Regulations complement these provisions, particularly regarding the application of transfer pricing methods and the documentation of intangibles, intragroup services, and business restructurings.

The Federal Fees Law, through Articles 53-G and 53-H, governs the fees applicable to the filing and review of Advance Pricing Agreements (APAs).

Miscellaneous Tax Rules (RMF)

The Miscellaneous Tax Rules issued annually provide general rules that clarify, refine or expand on technical aspects of the regime’s application. These rules cover:

• requirements for submitting information via the Multiple Informative Return (DIM);
• deadlines and requirements for supporting documentation;
• operational details for APAs;
• safe harbour rules for maquiladora companies;
• filing of reportable schemes;
• submission of the taxpayer’s tax situation report; and
• submission of tax opinions via the SIPRED platform for obligated taxpayers.

Administrative Pronouncements

The Tax Administration Service (SAT) issues normative and non-binding criteria reflecting its interpretation of tax provisions related to transfer pricing. While not mandatory, these criteria serve as a key interpretative reference for both the authorities and taxpayers.

Recent examples include:

• criteria on royalties, intragroup services, and the use of the interquartile range; and
• guidelines on the materiality of related-party transactions (2024 tax reform).

International References

Under Article 179 of the LISR, Mexican provisions must be interpreted in accordance with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, provided they are consistent with national legislation and Mexico’s treaties.

This regulatory framework ensures that transactions between related parties reflect market conditions and prevents base erosion through artificial or unreasonable pricing. Technical, documentary and substantive compliance is critical for effective tax defence in this area.

In Mexico, the transfer pricing regime began shortly after the signing of the North American Free Trade Agreement (NAFTA) in 1994. By 1997, the country adopted a “standard” transfer pricing framework, requiring the application of the arm’s length principle, a comprehensive comparability analysis, the use of transfer pricing methods, and interquartile ranges to assess the arm’s length nature of taxpayers’ transactions.

Over time, the regime has addressed specific aspects, such as the use of transactional financial information (2002), the recognition of unique and valuable contributions, and the prohibition of adjusting taxpayers’ results within the arm’s length range (2019, through non-binding criteria). In 2022, substantive reforms further clarified Mexico’s position on sensitive issues, including the requirement for a functional analysis of both parties to the transaction, the use of financial information across business cycles, and the extension of reporting obligations to domestic taxpayers.

Additionally, the 2024 tax reform (published in November 2023) introduced changes regarding the materiality of related-party transactions and supporting documentation requirements.

Article 179 of Mexico’s Income Tax Law defines the criteria for related-party status, which include: administration, control, direct or indirect ownership, joint ventures, related parties of joint ventures, permanent establishments and their related parties, as well as preferential tax regimes when engaging in transactions with Mexican residents.

The rules are flexible, which can create some uncertainty for taxpayers. For example, key terms such as “control” or “administration” are not explicitly defined, leaving room for interpretation.

The transfer pricing methods outlined in Article 180 of Mexico’s Income Tax Law are as follows:

• Uncontrolled Comparable Price Method (CUP);
• Resale Price Method;
• Cost Plus Method;
• Profit Split Method (contribution profit split);
• Residual Profit Split Method; and
• Transactional Net Margin Method (TNMM).

Mexican legislation does not provide for unspecified transfer pricing methods.

Mexico mandates the primary application of the Uncontrolled Comparable Price Method (CUP) (LISR 180-I).

Article 180 of the Income Tax Law (LISR) prioritises the use of the interquartile range, calculated as defined in Article 302 of the LISR Regulations. Alternative methods to the interquartile range may be considered within the framework of a mutual agreement procedure under treaties or as authorised by the Tax Administration Service (SAT) through general rules.

It is important to note that tax authorities, through Non-Binding Criterion 40/ISR/NV (“Modifications to the Value of Related-Party Transactions Within the Interquartile Range”), have highlighted the possibility of making adjustments and subjecting such modifications to tax audits.

The implementation of comparability adjustments is provided for in Article 179 of the Income Tax Law (LISR). It is important to emphasise that the specific adjustment formulas considered by the SAT were published digitally on the government website.

In the event of submitting a transfer pricing adjustment, a complementary tax return must be filed.

Mexico does not have notable rules specifically relating to the transfer pricing of intangibles, but it is important to consider Non-Binding Criterion 39 regarding the execution of activities classified as “unique and valuable contributions” (activities involving intangibles or aimed at the development of intangible assets). These activities may influence the selection of the transfer pricing method to be applied, typically the contribution profit split method.

Mexico does not have any special rules contemplating the use of after-the-fact evidence to reprice transactions involving hard-to-value intangibles. However, if intercompany transactions involve the transfer of hard-to-value intangibles, such transactions must be reported as they qualify as a reportable scheme.

The Miscellaneous Tax Resolution, under Rule 3.3.1.27, requires that costs arising from shared functions be supported by a cost contribution agreement in accordance with Chapter VIII of the OECD Transfer Pricing Guidelines.

Mexican legislation permits taxpayers to make upward transfer pricing adjustments after filing their annual tax returns, provided certain conditions and formalities are met.

Under Article 179 of the Mexican Income Tax Law (LISR), taxpayers may perform compensatory adjustments to increase taxable income or decrease deductions to ensure that related-party transactions comply with the arm’s length principle, falling within the range of prices agreed upon by independent parties in comparable transactions.

Conditions for Validity

The following conditions must be met in order for the adjustment to be made.

• Timing of the Adjustment – The adjustment must correspond to the same fiscal year as the transaction, meaning it must be accrued and documented within the same fiscal period, even if it is reflected in accounting records at a later date.
• Supporting Documentation – The adjustment must be supported by a robust transfer pricing study, including functional analysis, comparables, methodology, and evidence of the adjustment’s calculation.
• Accounting and Tax Reporting – The adjustment must be reflected in the taxpayer’s accounting records, impact the fiscal results of the relevant fiscal year, and be reported in complementary tax returns if the annual tax return has already been filed.

Limitations

Limitations to adjustments are as follows.

• Compensatory adjustments are generally limited to upward adjustments, increasing the taxable base (income or profit) in Mexico. Downward adjustments, which reduce taxable income or increase tax losses, are not explicitly prohibited by law but are rarely accepted by the Mexican tax authorities.
• The Mexican tax authority (SAT) typically rejects downward adjustments due to their negative impact on tax collection and the challenges of auditing their reasonableness.
• For downward adjustments to be considered, they must often arise within the framework of a Mutual Agreement Procedure (MAP) under a tax treaty or be exceptionally well-documented to demonstrate compliance with the arm’s length principle.

Conclusion

The Mexican regulatory framework allows for upward transfer pricing adjustments after filing annual tax returns, provided they are attributable to the same fiscal year, fully documented, and properly reflected in accounting and tax filings. While downward adjustments are not explicitly prohibited, they are seldom accepted in practice and generally require additional scrutiny or international agreements to be considered valid.

In line with 5.1 Upward Transfer Pricing Adjustments, the Mexican tax authorities have established, through the Miscellaneous Tax Resolution in Rule 3.9.1.1., the different types of transfer pricing adjustments. These include:

• voluntary or compensatory adjustments;
• primary adjustments;
• domestic or foreign correlative adjustments; and
• secondary adjustments.

A secondary adjustment is defined as: “An adjustment that results from the application of a tax contribution, in accordance with the applicable tax legislation, after a transfer pricing adjustment has been determined for a transaction. It is generally characterized as a deemed dividend.”

Mexico has an extensive network of double taxation treaties, totalling 63 to date, as well as at least 16 comprehensive information exchange agreements with countries considered to be preferential tax regimes. One of the key instruments is the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports.

Mexico actively co-operates in international tax enforcement through co-ordinated or simultaneous audits, which are legally supported by Article 42 of the Federal Fiscal Code (CFF), Articles 25 and 26 of double taxation treaties (based on the OECD Model), and the Convention on Mutual Administrative Assistance in Tax Matters (MAAC). This multilateral instrument enables information exchange, assistance in tax collection, and joint audits.

Additionally, Mexico has adopted the Multilateral Instrument (MLI), which automatically modifies provisions of existing treaties to implement BEPS minimum standards, including the Mutual Agreement Procedure (MAP) and measures for effective dispute resolution, such as simultaneous reviews.

At an operational level, Mexico participates in the OECD’s International Compliance Assurance Programme (ICAP), which allows multinational groups to undergo co-ordinated risk assessments by multiple tax authorities, thereby reducing risks and promoting ex-ante certainty on transfer pricing matters.

Mexico has a well-established APA (Advance Pricing Agreement) programme, which originally allocated a significant portion of its resources to the maquiladora industry. The regulatory framework for obtaining APAs – whether unilateral, bilateral or multilateral – is primarily found in Articles 34 and 34-A of the Federal Fiscal Code (CFF).

The Mexican APA programme is limited to transfer pricing matters. However, domestic legislation includes a legal mechanism known as a “lesividad” judgment. Through this process, the tax authority may revoke its own resolution approving an APA if it determines that the resolution is harmful to the public interest or inconsistent with applicable tax laws.

The Mexican APA programme is administered by the Tax Administration Service (SAT), through the General Administration of Large Taxpayers and its Central Administration for Transfer Pricing Audits.

Mexico has signed numerous double taxation treaties, which include specific clauses for the negotiation of Mutual Agreement Procedures (MAP). These provisions allow the SAT to co-ordinate with other tax administrations to resolve tax disputes or negotiate bilateral/multilateral APAs.

In Mexico, Advance Pricing Agreements (APAs) are regulated under Article 34-A of the Federal Fiscal Code (CFF). These agreements allow taxpayers to establish, in advance and on a binding basis, the methodology for determining transfer pricing in transactions with related parties.

Although the regulations do not explicitly restrict the types of taxpayers or transactions eligible for an APA, in practice, the SAT evaluates each request based on various factors. These include the complexity of the transactions, the volume of operations, the availability of comparable information, and the taxpayer’s ability to provide detailed documentation. Therefore, while there are no formal prohibitions, APAs are typically more viable for taxpayers with complex organisational structures or significant international operations.

It is important to note that maquiladora companies previously had the option to request APAs under a specific methodology. However, this option was eliminated in 2021, thereby limiting access to this mechanism for the maquiladora sector.

In summary, while there are no strict legal limitations, access to an APA in Mexico is subject to a case-by-case evaluation by the SAT. This evaluation considers the nature and complexity of the taxpayer’s operations. Additionally, after an APA is issued, the tax authority may later review the resolution through a lesividad judgment. In such cases, the SAT may nullify the APA if it determines that the agreement was issued in error or to the detriment of the tax authorities.

In the Mexican regulatory framework, Advance Pricing Agreements (APAs) are primarily governed by Article 34-A of the Federal Fiscal Code (CFF) and specific rules outlined in the current Miscellaneous Tax Resolution (MTR).

Taxpayers must submit their APA request no later than June 30th of the fiscal year immediately following the first fiscal year intended to be covered by the agreement (in accordance with Article 34-A, sixth paragraph of the CFF, and Rule 3.9.1.4 of the MTR 2024). For example, if a taxpayer wishes to cover fiscal years 2023 to 2025, the request must be submitted no later than 30 June 2024.

Differences Between Unilateral, Bilateral and Multilateral APAs

In all cases, the objective of APAs is to provide prior legal certainty regarding the tax treatment of transactions between related parties, under the arm’s length principle.

Unilateral APA

This is agreed exclusively between the taxpayer and the SAT. It applies only for tax purposes in Mexico and does not ensure the elimination of potential double taxation if the other country does not make a corresponding adjustment.

Bilateral APA

This involves the SAT and the tax administration of another country with which Mexico has a double taxation treaty. It requires the activation of a Mutual Agreement Procedure (MAP) under Article 25 of the relevant treaty. It allows for the co-ordination of adjustments in both jurisdictions, thereby eliminating double taxation.

Multilateral APA

This involves the SAT and more than one foreign tax administration, applicable to complex multinational structures with operations in multiple jurisdictions. It is processed through simultaneous or co-ordinated mutual agreement procedures.

In Mexico, taxpayers requesting an Advance Pricing Agreement (APA) are required to pay certain fees in accordance with the Federal Rights Law.

Under Article 53-G of the Federal Rights Law, a fee of MXN310,246.79 must be paid for the review and processing of each request for a resolution related to the prices, consideration amounts or profit margins in transactions between related parties.

Additionally, pursuant to Article 53-H of the same law, for each annual review conducted in connection with the agreement, a fee equivalent to 50% of the amount established in Article 53-G must be paid, ie, MXN155,123.40.

These fees are applicable for the 2025 fiscal year and can be referenced in the updated text of the Federal Rights Law published by the Mexican Chamber of Deputies.

APAs may be valid regarding the fiscal year in which they are requested, the immediately preceding year, and for up to three fiscal years following that in which they are requested. APAs may be valid for a longer period when they stem from a mutual agreement procedure in accordance with an international convention to which Mexico is a party.

By definition, the Mexican APA rule extends the protection of the agreement to one year prior to the period for which the APA is granted. Procedurally, there are no differences between unilateral and bilateral APAs, except for the involvement of counterpart tax authorities, which can extend the negotiation period of the APA.

Under the current regulatory framework in Mexico, non-compliance with transfer pricing obligations may result in specific penalties, tax adjustments and other relevant ancillary consequences. Below is a structured analysis of these implications, with corresponding legal foundations.

Specific Penalties in the Context of Transfer Pricing

The Federal Fiscal Code (CFF) establishes various penalties related to the omission of obligations concerning transactions between related parties.

Article 69-B bis

This article of the CFF establishes the presumption of the improper transfer of the right to offset tax losses, which can have significant implications in the context of transfer pricing.

Transfer pricing implications

The presumption of improper transfer of tax losses may directly affect transactions between related parties, especially when:

• corporate restructurings, mergers or spin-offs result in the transfer of tax losses to entities that did not generate those losses; and
• deductions from transactions with related parties account for more than 50% of the taxpayer’s total deductions, and these deductions increase significantly compared to the prior fiscal year.

Article 76 of the CFF

This article has the following effects:

• when tax authorities detect omitted contributions, they may impose a fine ranging from 55% to 75% of the omitted tax amount; and
• if a taxpayer declares a tax loss greater than the one actually incurred, the penalty will range from 30% to 40% of the undue difference.

Articles 81, Section XVII and 82, Section XVII of the CFF

Failure to report information on transactions with related parties, as required by Article 76 of the Income Tax Law (LISR), may result in a fine ranging from MXN89,180 to MXN178,360.

Articles 81, Section XL and 82, Section XXXVII of the CFF

Failure to submit or inaccurately submitting annual informational returns on related-party transactions, as required by Article 76-A of the LISR, carries a fine ranging from MXN199,630 to MXN284,220.

Articles 83, Section XV and 84, Section XIII of the CFF

If the taxpayer fails to identify related-party transactions with foreign residents in their accounting records and does not report them as required by Article 76 of the LISR, a fine of MXN2,020 to MXN6,070 will be imposed for each unreported transaction.

Article 32-D, Section IV of the CFF

As an additional measure, public entities are prohibited from contracting with taxpayers who have failed to file tax returns, including the informational obligations derived from Article 76-A of the LISR.

Transfer Pricing Documentation Obligation

Transfer pricing documentation is not only a formal obligation but also a requirement for the deductibility of expenses under Article 27 of the LISR.

• Section V – Deductions for payments to related parties residing abroad must be supported by documentation demonstrating that the transactions were conducted at arm’s length.
• Section XVIII – This documentation must exist no later than the date the annual tax return for the corresponding fiscal year is filed.

This documentation must include, among other elements, a detailed functional analysis, the selection of the transfer pricing method, a comparability study, and technical support for the agreed conditions. Its omission or deficiency may lead to the rejection of deductions, adjustments to taxable income, and other consequences.

Additional Tax Consequences of Non-Compliance

Deemed dividend

When taxable income is determined as a result of adjustments to related-party transactions, such income may be considered a deemed dividend under Article 140, Section VI of the LISR. This creates the obligation to withhold and remit the corresponding income tax as if it were an actual profit distribution.

Loss of VAT creditability

Under Article 5 of the Value Added Tax Law (the “VAT Law”), if deductions are rejected for income tax purposes due to transfer pricing non-compliance, the taxpayer also loses the right to credit the VAT associated with the unrecognised intercompany expenses.

Summary

In summary, proper transfer pricing documentation not only mitigates fiscal and penalty risks but also constitutes an essential element for preserving deductibility, ensuring tax neutrality, and effectively defending against determinations by the tax authority.

Historically, Mexico has required taxpayers to document and demonstrate the arm’s length nature of their intercompany transactions. In 2022, Article 76-A was introduced, which requires taxpayers to submit the Local File, Master File, and Country-by-Country Report, as outlined in Action 13 of the OECD’s BEPS Plan.

In general terms, the Mexican transfer pricing regime aligns with that of the OECD and even considers the supplementary application of the OECD Transfer Pricing Guidelines for cases not directly addressed in Mexican law, as established in the last paragraph of Article 179 of the Income Tax Law (LISR). This article was significantly amended in the 2022 tax reform, which clarified the scope of such supplementary application.

Mexico follows only the arm’s length standard.

In general terms, Mexico has been an early adopter of many of the recommendations from the BEPS Plan, which have influenced the issuance of specific regulations (eg, Article 76-A of LISR), non-binding criteria (eg, Criterion 39), and the rationale behind ongoing transfer pricing disputes. Additionally, Mexico has implemented the disclosure of reportable schemes (Action 12 of the BEPS Plan) and updated the concept of permanent establishments (Action 7).

Mexico has formally expressed its commitment to the Inclusive Framework on BEPS and has actively participated in discussions regarding the implementation of Pillar Two, including the 15% global minimum tax. Additionally, Mexico has been a proponent of the Amount B proposal under Pillar One, related to the determination of a pre-established profit for routine marketing activities, and has closely followed the work on the implementation of Pillar Two. However, with respect to the latter, the country’s position remains on standby, largely due to the stance taken by the United States.

There is no specific legislation on this matter in this jurisdiction.

Mexican government officials, both during and after their tenure, have participated in the development of the United Nations Practical Manual on Transfer Pricing and are also members of the Committee of Experts. However, the Income Tax Law (LISR) directly references the OECD Transfer Pricing Guidelines without mentioning the United Nations Manual.

In Mexico, safe harbour rules in the context of transfer pricing apply exclusively to maquiladora companies. These rules allow the determination of a minimum taxable profit by applying the greater of the following percentages:

• 6.5% of the total amount of costs and expenses incurred in the maquiladora operation; or
• 6.9% of the total value of the assets used in the maquiladora operation, including machinery, equipment and inventories provided by the foreign parent company.

This mechanism is established under Article 182 of the Income Tax Law (LISR) and aims to prevent the foreign entity from being considered as having a permanent establishment in Mexico.

Starting from the 2025 fiscal year, maquiladora companies are required to mandatorily apply the safe harbour method to comply with transfer pricing regulations. The option to obtain Advance Pricing Agreements (APAs) has been eliminated, with 2024 being the last year in which APAs for maquiladoras were accepted.

Additionally, the 2025 Miscellaneous Tax Resolution (RMF) establishes specific rules for maquiladoras.

• Related income – Up to 10% of total revenue may come from activities related to the maquiladora operation, such as administrative services or the sale of scrap, provided these are appropriately segmented in the accounting records.
• Documentation requirements – It is essential to have formalised contracts with a “certain date”, transfer pricing studies, and accounting records to support intercompany transactions.

It is important to note that, currently, no other safe harbour rules in Mexico apply to low-value-added services or provide exceptions to penalty regimes for transactions deemed immaterial. Therefore, maquiladora companies must ensure strict compliance with tax provisions and maintain robust documentation to support their operations.

Specific rules are not currently considered.

The SAT (Mexican Tax Administration) updated several non-binding criteria to reinforce its position on the economic substance of intercompany transactions. The following are among the most notable.

• Criterion 4/ISR/NV – Royalties for intangible assets originating in Mexico and paid to related parties residing abroad, which requires proof of the effective creation and exploitation of the intangible within national territory.
• Criterion 39/ISR/NV – Recognition of unique and valuable contributions, which imposes the rigorous application of the DEMPE analysis to justify the deduction of payments to related parties for complex intangibles.
• Criterion 40/ISR/NV – Adjustments to the value of transactions with related parties within the interquartile range, which allows the authority to adjust to the midpoint of the range when the agreed price is not within the interval, unless sufficient technical evidence is provided.

These guidelines emphasise that even when simplified determination methods, such as safe harbours, are applied, compliance with documentation requirements and evidence of materiality remain essential for deductibility and for defending against transfer pricing adjustments.

With the 2022 tax reform, Mexico introduced changes to the thin capitalisation rules, as well as the rules derived from Action 4 of the BEPS Plan, which impact the deductibility of interest on transactions with related parties.

As for Chapter X of the OECD Transfer Pricing Guidelines, it is supplementary in nature in Mexico, given that the Income Tax Law (LISR) explicitly provides for the application of the Guidelines in cases where specific regulations do not exist in Mexico.

The rules are not co-ordinated.

The first available defence mechanism is the conclusive agreement, which can be requested before PRODECON (the taxpayers defence office) during the exercise of audit powers and prior to the notification of a tax assessment. This mechanism allows the suspension of the audit and facilitates a negotiated resolution with the tax authority regarding the qualification of the facts, potentially leading to a reduction in penalties or the arrangement of payment facilities (Articles 69-C to 69-H of the Federal Fiscal Code (CFF)). It is worth mentioning that there are over 150 cases in PRODECON that directly or indirectly involve transfer pricing.

If no agreement is reached or a tax assessment is issued, the taxpayer may choose to file a revocation appeal, as provided in Articles 116 to 133-A of the CFF. This optional administrative remedy is filed before the same authority that issued the act and does not require a guarantee of the fiscal interest to suspend enforcement. Although resolutions are often upheld, this appeal represents a valuable opportunity to provide evidence, technical studies or other elements that could not be presented during the audit. There is also an exclusive substantive appeal (Articles 133-B to 133-G of the CFF), which is available when only substantive issues are being challenged.

At the judicial level, the taxpayer can file a contentious administrative lawsuit before the Federal Court of Administrative Justice (TFJA) without the need to first exhaust the administrative appeal. While prior payment of the tax assessment is not required, the fiscal interest must be guaranteed to suspend enforcement actions (Articles 141 to 144 of the CFF), except in the case of the exclusive substantive trial, where no such guarantee is necessary. The lawsuit may be filed before the regional chambers of the TFJA or, if the case involves foreign trade operations, before the corresponding Specialised Chamber.

Once the TFJA issues a ruling, the tax authority may file a fiscal review appeal, an exceptional remedy available when the ruling is unfavourable to the authority and the case’s significance, amount and impact warrant it. If the ruling is unfavourable or partially favourable for the taxpayer, they may challenge it through a direct amparo lawsuit, as provided in Articles 103 and 107 of the Constitution and Article 170 of the Amparo Law. This lawsuit is filed before the corresponding Collegiate Circuit Court and aims to contest the legality of the ruling, either due to substantive errors or significant procedural violations. Exceptionally, the Supreme Court of Justice of the Nation (SCJN) may take up the case through a review appeal when there is a need to directly interpret constitutional rules or if the case is of special interest and significance (Article 107, Section IX of the Constitution, and Article 81 of the Amparo Law).

Additionally, in 2024, the General Law on Alternative Dispute Resolution Mechanisms was approved; however, its implementation is still pending.

Note: The recent judicial reform has already been approved and is in the process of being implemented. This may affect judicial independence and could eventually lead to institutional changes in the configuration of the TFJA.

Transfer pricing jurisprudence has strengthened in recent years, although it is still in the process of consolidation. It primarily derives from Articles 90, 179 and 180 of the Income Tax Law (LISR), interpreted in accordance with the OECD Guidelines. Court rulings have addressed the selection of methods, the burden of proof, functional analysis, and the limits of the tax authority’s actions.

Relevant examples include the following.

• Digital Record: 2024896 – Heading: Transfer pricing. The tax authority must specifically substantiate and justify the selection of the method used to compare agreed prices and conditions.
• Digital Record: 2020107 – Heading: Transfer pricing. The taxpayer is responsible for proving the materiality of services provided by related parties.
• Digital Record: 2013543 – Heading: Transfer pricing. The tax authority cannot reject the transactional net margin method (TNMM) if the taxpayer justifies its selection and stable profits are demonstrated.
• Digital Record: 2013543 – Heading: Informative returns for related parties. The obligation established in Article 76-A of the Income Tax Law, in effect as of 1 January 2016, reflects the international commitments assumed by the Mexican state.
• Digital Record: 2014227 – Heading: Informative returns for related parties. An indirect amparo lawsuit is inadmissible against the multilateral agreement between competent authorities on the exchange of country-by-country reports, as it does not directly contain regulatory provisions applicable to taxpayers.

These precedents have provided greater clarity regarding taxpayer rights and the foundational standards required of the tax authority.

In recent years, courts have issued rulings that have shaped the interpretation and application of transfer pricing provisions in the Mexican context. These decisions have been instrumental in defining the technical and legal limits of methods, the burden of proof, and adherence to the arm’s length principle.

Some notable examples include the following. These precedents have raised the standard of analysis for both the tax authority and taxpayers, aligning Mexican practices more closely with international standards for transparency and economic reasonableness.

Digital Record: 2024896

Source: TFJA Gazette, Seventh Epoch, Year III, No 20, November 2013, p 1192

Heading: Transfer pricing. The tax authority must specifically substantiate and justify the selection of the method used to compare agreed prices and conditions.

This ruling requires the SAT to rigorously justify its methodology, limiting the arbitrary use of alternative methods.

Digital Record: 2020107

Source: TFJA Journal, Eighth Epoch, Year III, No 19, February 2018, p 565

Heading: Transfer pricing. The taxpayer is responsible for proving the materiality of services rendered by related parties.

This reinforces the need for documentary support and evidence of the effective provision of services to justify their deductibility.

Digital Record: 2013543

Source: TFJA Journal, Seventh Epoch, Year III, No 29, September 2014, p 6863.4

Heading: Transfer pricing. The tax authority cannot reject the transactional net margin method (TNMM) if the taxpayer justifies its selection and stable profits are demonstrated.

This precedent consolidates the recognition of TNMM as valid in sectors with low profit variability when its selection is justified according to comparability guidelines.

There are no specific regulations restricting outbound payments relating to uncontrolled transactions.

There are no specific regulations restricting outbound payments relating to controlled transactions.

Mexico does not automatically recognise foreign legal restrictions as justification for deviating from the arm’s length principle. The Income Tax Law (LISR) does not include an explicit provision regulating their generalised recognition. However, the tax authority and courts may consider such restrictions, provided the taxpayer substantiates them with objective and sufficient evidence.

In a relevant precedent, the TFJA established that alternative documentation may be accepted when a foreign legal restriction prevents the taxpayer from making adjustments or applying market conditions.

Digital Record: 2015483

Heading: Transfer pricing. The submission of complementary or alternative documents is admissible when a foreign legal restriction exists.

This precedent originated in a case involving a taxpayer operating with entities located in countries sanctioned by the Office of Foreign Assets Control (OFAC) of the United States. Since the sanctions prohibited accounting adjustments or transfers, the court deemed the supplementary evidence presented as valid to justify the agreed terms.

This approach aligns with the OECD Guidelines, which allow the consideration of local regulations as part of the comparability analysis when they substantially affect market conditions.

There is no public information on APAs or transfer pricing audit outcomes.

The use of secret comparables is case-specific (limited to on-site visits/audits) and is addressed in Articles 46, Section IV and 69 of the Federal Fiscal Code.