In Mexico, the transfer pricing regime is regulated through a comprehensive legal and administrative framework that includes statutes, regulations, normative criteria and administrative rulings. The following is a summary of its principal sources and the rules applicable to related party transactions.

Laws (Statutes)

The Income Tax Law (Ley del Impuesto sobre la Renta or LISR) constitutes the cornerstone of the Mexican transfer pricing regime. In particular, Articles 76, 76-A, 179 and 180 establish both formal and substantive obligations for taxpayers that carry out transactions with related parties, whether domestic or foreign. These provisions expressly incorporate the arm’s length principle and grant the tax authority the power to adjust income or deductions when agreed prices fall outside the range that would have been negotiated between independent parties under comparable circumstances.

Article 76-A of the LISR also requires certain taxpayers to prepare transfer pricing documentation, including the local file, master file and country-by-country report, when the applicable thresholds are met. It further establishes penalties for failure to comply with these documentation obligations.

The Federal Tax Code plays an important role in transfer pricing enforcement. Article 5-A introduces a general anti-avoidance rule (GAAR) under which the tax authority may recharacterise transactions that lack a business purpose (razón de negocios) and generate a direct or indirect tax benefit. This provision is particularly relevant in the transfer pricing context, as it may be used to challenge intercompany restructurings or to deny deductions when the economic substance does not support the tax treatment adopted. Its application requires a prior favourable opinion from a collegiate body composed of officials from the Ministry of Finance and the SAT.

In addition, Article 42-B of the Federal Tax Code authorises the tax authority to determine the simulation of legal acts carried out exclusively for tax purposes, provided that the transactions involve related parties. To apply this provision, the authority must identify the simulated act and the act actually carried out, quantify the tax benefit obtained, and describe the elements supporting the existence of simulation, including the intent of the parties. This provision, introduced as part of the 2021 reform, operates as a targeted enforcement mechanism in transfer pricing audits.

Regulations and Secondary Provisions

The Regulations to the LISR complement the statutory framework, particularly with respect to the application of transfer pricing methods and the documentation requirements for intangibles, intragroup services and business restructurings.

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

Miscellaneous Tax Rules (Reglas Misceláneas Fiscales or RMF)

The RMF, which are issued annually, contain general rules that clarify, refine or expand upon technical aspects of the application of the transfer pricing regime. These rules address, among other matters:

• the requirements for submitting information through the Multiple Informative Return (DIM);
• deadlines and requirements applicable to supporting documentation;
• procedural and operational aspects of APAs;
• safe harbour rules for maquiladora companies;
• obligations relating to the disclosure of reportable schemes;
• the filing of the taxpayer’s tax situation report; and
• the submission of tax opinions through the SIPRED platform by obligated taxpayers.

Administrative Pronouncements

The Tax Administration Service (SAT) issues both normative and non-binding criteria that reflect its interpretation of transfer pricing provisions. Although these criteria are not legally binding, they serve as an important interpretative reference for both the tax authorities and taxpayers.

Recent pronouncements include criteria related to royalties, intragroup services and the application of the interquartile range, as well as guidance on the materiality of related party transactions introduced as part of the 2024 tax reform.

International References

Pursuant to Article 179 of the LISR, Mexican transfer pricing provisions must be interpreted in accordance with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, to the extent that they are consistent with domestic legislation and Mexico’s tax treaties.

This regulatory framework seeks to ensure that transactions between related parties reflect market conditions and to prevent base erosion through artificial or unreasonable pricing. Accordingly, technical, documentary and substantive compliance is essential for an effective tax defence in transfer pricing matters.

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 had adopted a standard transfer pricing framework that requires the application of the arm’s length principle, a comprehensive comparability analysis, the use of recognised transfer pricing methods, and interquartile ranges to assess whether related party transactions are conducted at arm’s length.

Over time, the regime has incorporated rules addressing specific aspects, including the use of transactional financial information in 2002, the recognition of unique and valuable contributions, and the prohibition of adjusting taxpayers’ results within the arm’s length range. The latter was introduced in 2019 through non-binding criteria. In 2022, substantive reforms further clarified Mexico’s position on several sensitive issues, such as the requirement to perform a functional analysis of both parties to a transaction, the use of financial information covering business cycles, and the extension of transfer pricing reporting obligations to domestic taxpayers.

Additionally, the 2024 tax reform, published in November 2023, introduced changes related to the materiality of related party transactions and the supporting documentation requirements. These changes are currently in force.

Most recently, the November 2025 reform to the Federal Tax Code introduced significant procedural changes relevant to transfer pricing disputes. These include the creation of a new exclusive substantive appeal (recurso de revocación exclusivo de fondo, Articles 133 B through 133 G), which allows taxpayers to challenge exclusively the substance of a tax assessment without first addressing formal or procedural defects. Amendments to Article 141 also established a mandatory order for the types of guarantees that must be offered to suspend the enforcement of a tax liability.

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 (LISR) 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).

Domestic legislation establishes a hierarchy in the selection of the method, favouring first the uncontrolled comparable price method. In any case, the selection of the method implemented must be justified.

Mexican legislation does not provide for unspecified transfer pricing methods. Only the six methods expressly set forth in Article 180 of the LISR are recognised for transfer pricing purposes. No alternative or unspecified methods may be applied outside this statutory list.

Mexico establishes a hierarchy favouring the Uncontrolled Comparable Price Method (CUP) under Article 180, Section I of the LISR. Where the CUP method cannot be reliably applied, the taxpayer must justify the selection of an alternative method based on the nature of the transaction, the availability of comparable information, and the results of the functional analysis. In all cases, the selection must be adequately supported in the transfer pricing documentation.

Article 180 of the 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 34/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 LISR. It is important to emphasise that the specific adjustment formulas considered by the SAT were published digitally on the official 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 33/ISR/NV 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 that 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 in order to ensure that related party transactions comply with the arm’s length principle and fall within the range of prices agreed upon by independent parties in comparable transactions.

Conditions for Validity

The following conditions must be met for the adjustment to be valid.

Timing of the Adjustment

The adjustment must correspond to the same fiscal year as the underlying transaction. This means it must be accrued and documented within the same fiscal period, even if it is recorded in the accounting books at a later date.

Supporting Documentation

The adjustment must be supported by a robust transfer pricing study. This study should include a functional analysis, a comparability analysis, the selected methodology, and clear evidence supporting the calculation of the adjustment.

Accounting and Tax Reporting

The adjustment must be reflected in the taxpayer’s accounting records, affect the fiscal results of the relevant fiscal year, and be reported through complementary tax returns if the annual tax return has already been filed.

Limitations

Limitations applicable to compensatory adjustments include the following.

Compensatory adjustments are generally limited to upward adjustments that increase the taxable base in Mexico, whether through higher income or higher profit. Downward adjustments, which reduce taxable income or increase tax losses, are not expressly prohibited by law, but they are rarely accepted by the Mexican tax authorities.

The Mexican tax authority (SAT) typically rejects downward adjustments due to their adverse impact on tax collection and the challenges involved in auditing their reasonableness.

For downward adjustments to be considered, they generally must arise within the framework of a Mutual Agreement Procedure (MAP) under an applicable tax treaty, or be supported by exceptionally strong documentation demonstrating compliance with the arm’s length principle.

Conclusion

The Mexican regulatory framework allows taxpayers to make upward transfer pricing adjustments after filing their annual tax returns, provided that the adjustments are attributable to the same fiscal year, are fully documented, and are properly reflected in both accounting records and tax filings. While downward adjustments are not explicitly prohibited, they are rarely accepted in practice and typically require heightened scrutiny or the involvement of international dispute resolution mechanisms 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 characterised as a deemed dividend.”

For a more detailed discussion of the tax consequences arising from deemed dividends in the transfer pricing context, see 8.1 Transfer Pricing Penalties and Defences.

Mexico has an extensive network of double taxation treaties – currently over 60 in force – as well as at least 16 comprehensive information exchange agreements with countries considered to have preferential tax regimes. One of the key instruments is the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports.

The domestic legal basis for information exchange is found in Article 69 of the Federal Tax Code, which, while imposing a general duty of tax secrecy, expressly authorises the exchange of taxpayer information with foreign authorities pursuant to tax treaties, broad exchange of information agreements, and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Mexico actively co-operates in international tax enforcement through co-ordinated or simultaneous audits. These audits are legally supported by Article 42 of the Federal Tax 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 the exchange of information, assistance in tax collection, and the conduct of joint audits. Although the legal framework robustly supports these forms of co-operation, in practice co-ordinated and simultaneous audits remain selective and are initiated on a case by case basis, primarily with key treaty partners (see 6.3 Simultaneous Controls for further detail).

In addition, Mexico has adopted the Multilateral Instrument (MLI), which automatically modifies provisions of existing treaties to implement BEPS minimum standards. These standards include the Mutual Agreement Procedure and measures aimed at effective dispute resolution, such as simultaneous reviews.

It should be noted that Article 42 of the Federal Tax Code was amended in November 2025. This amendment reinforced the taxpayer’s right to be informed during the exercise of audit powers, including the obligation of the SAT to establish a procedure for informing the taxpayer of the opportunity to attend its offices during the audit process.

Mexico does co-operate in simultaneous tax controls, particularly in transfer pricing audits involving multinational groups. However, such controls are not routine and generally occur on a case by case basis with treaty partners.

The legal framework for this co-operation is primarily grounded in Article 69, sixth paragraph, of the Federal Tax Code, which expressly authorises the exchange of information with foreign tax authorities pursuant to tax treaties, broad exchange of information agreements and multilateral conventions. This framework is complemented by the relevant provisions of the Miscellaneous Tax Resolution, currently Rule 2.1.2, which define and recognise Mexico’s tax treaties and its participation in the OECD Convention on Mutual Administrative Assistance in Tax Matters as qualifying broad exchange of information agreements.

Mexico also participates in enhanced co-operation mechanisms, including bilateral and, to a lesser extent, multilateral advance pricing agreements. Fully fledged joint audits remain uncommon in practice.

During the audit process, communication is generally maintained through formal and institutional channels between the competent authorities. This includes structured exchanges of information and technical meetings, which ensure ongoing co-ordination throughout the audit. Nevertheless, the process remains largely authority driven.

Mexico does not currently participate in the OECD International Compliance Assurance Programme (ICAP) or in similar multilateral voluntary risk assessment programmes. ICAP is a voluntary multilateral risk assessment and assurance programme intended to facilitate open and co-operative engagement between multinational enterprise groups and tax administrations across multiple jurisdictions. However, Mexico is not listed among the tax administrations that formally participate in the programme at this time.

Nevertheless, Mexico does engage in other forms of international co-operation and multilateral risk management. These include bilateral, and to a lesser extent multilateral, advance pricing agreements, mutual agreement procedures, and structured exchanges of information under OECD based instruments. Together, these mechanisms allow for a degree of co-ordination and early risk assessment in cross border transfer pricing matters.

Mexico has a well-established Advance Pricing Agreement programme, which initially allocated a significant portion of its resources to the maquiladora industry. The regulatory framework for obtaining APAs, whether unilateral, bilateral, or multilateral, is primarily set out in Articles 34 and 34 A of the Federal Tax 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 legal basis for lesividad proceedings is found in Article 36, first paragraph, of the Federal Tax Code. This provision states that individual administrative resolutions favourable to a taxpayer may be modified only by the Federal Court of Administrative Justice through a proceeding initiated by the tax authorities themselves. Article 36 was amended in November 2025 to refine the authority’s discretionary power to review and, on a one time basis, modify or revoke tax assessments issued in the taxpayer’s favour.

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. These provisions allow the SAT to co-ordinate with other tax administrations to resolve tax disputes or negotiate bilateral/multilateral APAs.

In Mexico, APAs are regulated under Article 34-A of the Federal Tax Code. 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 a range of factors. These factors include the complexity of the transactions, the volume of operations, the availability of comparable information, and the taxpayer’s ability to provide detailed documentation. As a result, while there are no formal prohibitions, APAs are generally more viable for taxpayers with complex organisational structures or significant international operations.

It is also important to note that maquiladora companies previously had the option to request APAs under a specific methodology. However, this option has been progressively phased out, with the 2024 fiscal year being the last year in which APAs for maquiladoras were accepted. From the 2025 fiscal year onward, maquiladora companies are required to apply the safe harbour method exclusively (see 11.1 Transfer Pricing Safe Harbours).

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

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

Taxpayers must submit their APA request no later than 30 June 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 3.9.1.5 of the MTR 2026).

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 who request an Advance Pricing Agreement 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 MXN 310,246.79 must be paid for the review and processing of each request for a resolution relating to prices, consideration amounts, or profit margins in transactions between related parties.

In addition, pursuant to Article 53 H of the same law, a fee of MXN 65,049.36 is payable for each annual review conducted in connection with the agreement.

These fees apply for the 2025 fiscal year and are reflected in the updated version 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 MAP 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 counterparty 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, together with their corresponding legal foundations.

Specific Penalties in the Context of Transfer Pricing

The Federal Tax Code establishes various penalties related to the failure to comply with obligations arising from transactions between related parties.

Article 69-B bis

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

Transfer pricing implications

The presumption of an improper transfer of tax losses may directly affect transactions between related parties, particularly in cases where:

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

Article 76 of the CFF

Article 76 of the Federal Tax Code (not to be confused with Article 76 of the Income Tax Law (LISR), which governs informational reporting obligations for related-party transactions) establishes the following penalties.

This article has the following effects:

• where the tax authorities determine omitted tax contributions, a fine ranging from 55% to 75% of the omitted tax may be imposed; and
• if a taxpayer reports a tax loss greater than the one actually incurred, a penalty ranging from 30% to 40% of the undue difference applies.

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

Failure to report information on related-party transactions, as required under Article 76 of the LISR, may result in a fine ranging from MXN112,770 to MXN225,500.

Note: Penalty amounts are updated annually through the Miscellaneous Tax Resolution. The amounts indicated above correspond to the most recently published update and should be verified against the Miscellaneous Tax Resolution in force at the time of application.

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

Failure to submit, or the submission of inaccurate, annual informational returns relating to related-party transactions, as required under Article 76-A of the LISR, is subject to a fine ranging from MXN226,000 to MXN321,770.

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

Where a taxpayer fails to identify transactions with related parties resident abroad in its accounting records and does not report them as required under Article 76 of the LISR, a fine ranging from MXN2,560 to MXN7,680 will be imposed for each unreported transaction.

Article 32-D, Section IV of the CFF

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

Where a transfer pricing arrangement qualifies as a reportable scheme under Articles 199 to 202 of the CFF, failure to disclose it gives rise to additional and significant penalties. Tax advisers may be subject to fines ranging from MXN62,390 to MXN24,952,660 for non-disclosure or incomplete disclosure, pursuant to Article 82-B, Section I. Taxpayers may lose the tax benefit associated with the undisclosed scheme and may also be subject to an additional penalty ranging from 50% to 75% of the tax benefit obtained or expected, aggregated across all fiscal years involved, in accordance with Article 82-D, Section I.

Transfer Pricing Documentation Obligation

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

• Section V – deductions for payments made to related parties resident abroad must be supported by documentation demonstrating that the transactions were carried out on an arm’s length basis.
• Section XVIII – such documentation must be available no later than the date on which the annual tax return for the corresponding fiscal year is filed.

This documentation must include, among other elements, a detailed functional analysis, the selection and application of the transfer pricing method, a comparability analysis, and technical support for the agreed pricing conditions. Failure to prepare or adequately support this documentation may result in the denial of deductions, adjustments to taxable income, and additional adverse consequences.

Additional Tax Consequences of Non-Compliance

Deemed dividend

As noted in 5.2 Secondary Transfer Pricing Adjustments, secondary transfer pricing adjustments may result in a deemed dividend. Where taxable income is determined as a consequence of adjustments to related-party transactions, such income may be characterised as a deemed dividend under Article 140, Section VI of the LISR.

Loss of VAT creditability

Pursuant to Article 5 of the Value Added Tax Law, where deductions are disallowed for income tax purposes due to transfer pricing non-compliance, the taxpayer also loses the right to credit the value added tax associated with the disallowed intercompany expenses.

Summary

In summary, maintaining proper transfer pricing documentation not only mitigates tax and penalty exposure but also constitutes an essential element in preserving deductibility, maintaining tax neutrality, and effectively defending against assessments issued by the tax authorities.

Historically, Mexico has required taxpayers to document and demonstrate that their intercompany transactions comply with the arm’s length principle. With the 2022 tax reform, Article 76-A of the LISR was introduced, requiring taxpayers to file three standardised returns aligned with BEPS Action 13.

The first is the Local File, which contains detailed information on related-party transactions, including transactional data, functional analyses, and comparability analyses for each controlled transaction.

The second is the Master File, which provides an overview of the multinational group’s global operations, transfer pricing policies, and the allocation of income and economic activity across jurisdictions.

The third is the Country-by-Country Report (CbCR), which discloses, for each jurisdiction in which the group operates, revenue, profit before tax, income tax paid and accrued, accumulated earnings, number of employees, tangible assets, and stated capital.

These returns must be filed electronically no later than 31 December of the year immediately following the fiscal year to which the information relates. A significant change introduced by the 2022 reform was the extension of transfer pricing documentation obligations to domestic related-party transactions, which were previously not subject to the same reporting requirements.

The 2024 reform, published in November 2023, further strengthened documentation requirements by introducing materiality standards for related-party transactions and supplementary documentation. Under these rules, taxpayers are required to demonstrate not only that pricing is at arm’s length, but also that the underlying transactions have economic substance and were effectively carried out.

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

Mexico follows only the arm’s length standard.

In general terms, Mexico has been an early adopter of many of the recommendations set out in the BEPS Plan. These recommendations have influenced the issuance of specific regulations, for example Article 76-A of the LISR, as well as non-binding criteria, including those discussed in 11.3 Unique Transfer Pricing Rules or Practices, and have also shaped the rationale behind ongoing transfer pricing disputes. In addition, Mexico has implemented the disclosure of reportable schemes under Action 12 of the BEPS Plan and has updated the concept of permanent establishments in line with Action 7.

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

Although Amount B of Pillar One represents a simplification of transfer pricing compliance for routine distribution and marketing transactions, there has, to date, been no reform allowing for adaptation or transition toward Amount B. This remains the case despite the fact that its implementation is included in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, in their latest 2022 version, where it appears as an annex to Chapter IV.

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

Mexico has domestic rules governing the allocation of profits to permanent establishments. Under Mexican income tax law, permanent establishments are taxed as separate taxable units. Only the income attributable to the activities carried out in Mexico is subject to Mexican taxation.

Although Mexican legislation does not expressly adopt the Authorised OECD Approach, permanent establishments and their head offices are treated as related parties for transfer pricing purposes. As a result, the arm’s length principle applies to the attribution of profits. Profits must be determined based on the functions performed, assets used, and risks assumed by the permanent establishment, which in practice leads to an approach that is broadly aligned with the Authorised OECD Approach.

In addition, amendments introduced in 2020 to the Income Tax Law aligned Mexico’s definition of a permanent establishment with BEPS Action 7, particularly in relation to dependent agent permanent establishments. These changes expanded the circumstances under which a foreign resident may be deemed to have a permanent establishment in Mexico. Once a permanent establishment is recognised, profits must be attributed under the arm’s length framework described above.

No specific safe harbour rules apply to the allocation of profits to permanent establishments in Mexico. The attribution of profits is determined on a case by case basis following a functional analysis.

Mexican government officials, both during and after their tenure, have participated in the development of the United Nations Practical Manual on Transfer Pricing and have also served as members of the Committee of Experts. However, the Income Tax Law directly references the OECD Transfer Pricing Guidelines and does not mention the United Nations Manual.

In Mexico, safe harbour rules in the context of transfer pricing apply exclusively to maquiladora companies. These rules allow for the determination of a minimum taxable profit by applying the higher 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 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 in order to comply with transfer pricing regulations. The option to obtain Advance Pricing Agreements has been eliminated, with 2024 being the last year in which APAs for maquiladora companies were accepted.

Additionally, the 2026 Miscellaneous Tax Resolution (RMF) establishes specific rules applicable to maquiladora companies, including the following.

• Related income – up to 10% of total revenue may be derived from activities related to the maquiladora operation, such as administrative services or the sale of scrap, provided that these activities are properly 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, at present, no other safe harbour rules in Mexico apply to low value added services or provide exceptions to penalty regimes for transactions deemed immaterial. As a result, 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/PI concerns royalties for intangible assets originating in Mexico and paid to related parties residing abroad. It requires proof of the effective creation and exploitation of the intangible within national territory.
• Criterion 33/ISR/NV addresses the recognition of unique and valuable contributions and requires a rigorous application of the DEMPE analysis to justify the deduction of payments to related parties for complex intangibles.
• Criterion 34/ISR/NV relates to adjustments to the value of transactions with related parties within the interquartile range. It allows the authority to adjust the price to the midpoint of the range when the agreed value 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 to the rules derived from Action 4 of the BEPS Plan. These changes affect the deductibility of interest on transactions with related parties.

Chapter X of the OECD Transfer Pricing Guidelines has a supplementary role in Mexico. The Income Tax Law expressly provides for the application of the Guidelines in situations where specific Mexican regulations do not exist.

The rules are not co-ordinated.

The first available defence mechanism is the conclusive agreement, which may 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 for the suspension of the audit and facilitates a negotiated resolution with the tax authority regarding the qualification of the facts. It can lead to a reduction in penalties and, in some cases, to the arrangement of payment facilities (Articles 69-C to 69-H of the Federal Tax Code (CFF)). It is worth noting that there are more than 150 cases before PRODECON that directly or indirectly involve transfer pricing.

If no agreement is reached, or if a tax assessment is issued, the taxpayer may opt to file a revocation appeal, as provided in Articles 116 to 133-G of the CFF. This optional administrative remedy is filed before the same authority that issued the challenged act and does not require a guarantee of the fiscal interest in order to suspend enforcement. Although the resolutions issued are often confirmatory, this appeal represents a valuable opportunity to submit evidence, technical studies or other supporting elements that could not be presented during the audit process.

In addition, the November 2025 reform introduced the exclusive substantive appeal (recurso de revocación exclusivo de fondo), governed by Articles 133-B through 133-G of the Federal Tax Code. This remedy allows taxpayers to challenge exclusively the substance of a tax assessment, including transfer pricing determinations, by raising arguments related to the subject, object, tax base, rate or tariff, without the need to address formal or procedural defects.

Key features of this mechanism include the following.

• The taxpayer may request an oral hearing before the resolving authority, with the attendance of the issuing authority (Article 133-E).
• The taxpayer may submit expert opinions, and the resolving authority has the discretion to appoint its own expert and to cross-examine the taxpayer’s expert (Article 133-F).
• A guarantee of the fiscal interest is not required to suspend enforcement.

If the taxpayer raises both substantive and formal arguments, only the substantive arguments will be resolved.

This mechanism is particularly well suited for transfer pricing disputes, where the core disagreement typically concerns the selection and application of methods, the appropriateness of comparables, and the economic analysis underlying the arm’s length determination.

At the judicial level, the taxpayer may file a contentious administrative lawsuit before the Federal Court of Administrative Justice (TFJA) without the need to first exhaust administrative remedies. While prior payment of the tax assessment is not required, the fiscal interest must be guaranteed in order 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 required. The lawsuit may be filed before the Regional Chambers of the TFJA or, where the case involves foreign trade operations, before the relevant Specialised Chamber.

As amended in November 2025, Article 141 of the CFF now establishes a mandatory order for the types of guarantees that may be offered. Taxpayers are required to first offer a deposit certificate (billete de depósito), up to their economic capacity, before proceeding to other forms of guarantee.

Once the TFJA issues a ruling, the tax authority may file a fiscal review appeal. This is an exceptional remedy available when the ruling is unfavourable to the authority and the significance, amount and impact of the case justify it. If the ruling is unfavourable or only partially favourable to the taxpayer, the taxpayer 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 competent Collegiate Circuit Court and seeks to challenge the legality of the ruling, either due to substantive errors or significant procedural violations. In exceptional circumstances, the Supreme Court of Justice of the Nation (SCJN) may hear the case through a review appeal, where direct interpretation of constitutional provisions is required or where 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 remains pending.

Note: The recent judicial reform has already been approved and is currently in the process of being implemented. This reform may affect judicial independence and could ultimately lead to institutional changes in the structure and functioning 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, interpreted in accordance with the OECD Guidelines. Court rulings have addressed issues such as 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 demonstrates stable profits.
• Digital Record: 2013543. Heading: Informative returns for related parties. The obligation established in Article 76-A of the LISR, 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 significantly shaped the interpretation and application of transfer pricing provisions in Mexico. These decisions have been instrumental in defining the technical and legal limits of transfer pricing methods, clarifying the burden of proof, and reinforcing adherence to the arm’s length principle.

Some notable examples are outlined below. These precedents have raised the analytical standard required of both the tax authority and taxpayers, aligning Mexican practice more closely with international standards of 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 tax authority to rigorously substantiate and justify its chosen methodology, thereby limiting the arbitrary use of alternative transfer pricing 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 decision reinforces the need for adequate documentation and evidence demonstrating the effective provision of services in order to support 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 TNMM if the taxpayer justifies its selection and stable profits are demonstrated.

This precedent consolidates the recognition of the TNMM as a valid method in sectors with low profit variability, provided that its selection is properly justified in accordance with comparability guidelines.

Digital Record: IX-P-SS-206

Source: TFJA Journal, Ninth Epoch, Year II, No. 17, May 2023, p. 78

Heading: Income Tax. The guidelines on transfer pricing issued by the Organization for Economic Co-operation and Development (OECD) establish the temporal delimitation of advance pricing agreements as an essential element.

This precedent affirms temporality as an essential feature of advance pricing agreements, with the aim of providing greater specificity in the determination of transfer pricing for a defined number of years and ensuring legal certainty in their application.

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

While there are no explicit restrictions on outbound payments in controlled transactions, certain provisions operate as indirect limitations. The thin capitalisation rules under Article 28, Section XXVII of the LISR restrict the deductibility of interest paid to related parties abroad where the taxpayer’s debt to equity ratio exceeds 3:1. In addition, rules derived from BEPS Action 4 impose further limits on the deduction of net interest expenses, which in practice constrain the amount of intercompany financing costs that can be deducted in cross border related party transactions.

Mexico does not automatically recognise foreign legal restrictions as a justification for deviating from the arm’s length principle. The Income Tax Law does not contain an explicit provision regulating the general recognition of such restrictions. However, the tax authority and the courts may take foreign legal restrictions into account, provided that the taxpayer substantiates their existence and impact with objective and sufficient evidence.

In a relevant precedent, the Federal Court of Administrative Justice (TFJA) established that complementary or alternative documentation may be accepted when a foreign legal restriction prevents the taxpayer from making adjustments or applying market conditions in a transfer pricing context.

Digital Record: 2015483

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

This precedent arose from a case involving a taxpayer that carried out transactions with related entities located in countries subject to sanctions imposed by the United States Office of Foreign Assets Control (OFAC). Because the sanctions prohibited accounting adjustments or financial transfers, the court regarded the supplementary evidence submitted by the taxpayer as valid for justifying the agreed terms.

This approach is consistent with the OECD Transfer Pricing Guidelines, which allow local regulations to be considered in the comparability analysis when they have a substantial effect on market conditions.

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

The use of undisclosed comparables, often referred to as “secret comparables”, is governed by Article 69, fifth paragraph, of the Federal Tax Code. This provision establishes that when the tax authority exercises its powers in relation to transfer pricing, as set out in Articles 76, Sections IX and XII, 90, 110, 179, and 180 of the LISR, information concerning the identity of independent third parties involved in comparable transactions, together with the comparable data used to support the authority’s determination, must be treated as confidential.

Notwithstanding this confidentiality requirement, taxpayers may obtain access to such information through a designated authorised representative, in accordance with the procedure established in Article 46, Section IV of the Federal Tax Code. This procedure applies only in the context of on-site audits and requires the representative to execute a confidentiality undertaking. The subsequent revocation of the representative’s designation does not release either the representative or the taxpayer from their joint liability for any improper disclosure or personal use of the confidential information.

In practice, the SAT’s use of secret comparables in transfer pricing audits has been a recurring source of controversy. Taxpayers face significant limitations when seeking to challenge assessments that are based on information they cannot fully access or independently verify.