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21 June 2021

Mexico’s Tax Authorities publish list of expected effective income tax rates for large taxpayers

The Mexican Tax Authorities published a list of expected effective tax rates for various economic activities or industries for large taxpayers for tax years 2016 to 2019. Large taxpayers that participate in those activities or industries should compare their effective tax rate to the expected tax rate on the list and adjust their tax rate, if necessary. 

On 13 June 2021, the Mexican Tax Authorities (SAT) published on their webpage a list with the expected effective tax rates for 40 different economic activities/industries, including mining, manufacturing, retail and wholesale businesses, financial and insurance services, and the automotive and pharmaceutical industries. The expected effective tax rates are for tax years 2016, 2017, 2018 and 2019. In determining the expected effective tax rates, the SAT defined the effective tax rate as the current income tax liability on the corresponding tax return for the year divided by the gross taxable income for that year.

The SAT expects large taxpayers1 to compare the effective tax rate corresponding to their economic activity on the list with their actual rate for each applicable tax year and, if necessary, correct or modify their tax position by filing an amended annual tax return. Additionally, the SAT indicated that taxpayers with an effective tax rate greater than the referenced rate have a low risk of audit, while taxpayers with a lower-than-referenced effective tax rate have a higher risk of audit.

Currently, the SAT is working on determining the effective tax rates of the remaining economic activities included in Annex 6 of the current Miscellaneous Tax Resolution and will eventually publish them on their webpage.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young, LLP (United States), Latin America Business Center, New York

Ernst & Young LLP (United States), Latin America Business Center, Chicago

Ernst & Young LLP (United States), Latin America Business Center, Miami

Ernst & Young, LLP (United States), Latin America Business Center, San Diego

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

Ernst & Young Tax Co., Latin America Tax Desk, Japan & Asia Pacific

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Endnotes

  1. The definition of large taxpayers contained in the SAT internal regulation includes the following entities: (1) lending institutions and certain other institutions in the Mexican financial system; (2) holding companies; (3) enterprises in a holding company group; (4) taxpayers in the general corporate income tax regime that earned at least 500 million pesos in the previous tax year; (5) any private individual or legal entity engaging in transactions with related parties or investments under preferential tax regimes.

Document ID: 2021-5687

 
 

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