Mexico

To this date, Mexico has signed more than 60 International Double Taxation Agreements - download the complete guide to see the full listing -, which are listed in Appendix 4. In addition, on July 1st, 2023, the Multilateral Convention on the Implementation of Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) entered into force in Mexico.

Prevalence of DTAs

The Supreme Court of Justice of the Nation (SCJN) has ruled that international agreements containing human rights have the same hierarchy as the Federal Constitution, unless the Constitution provide an express limitation, in which case the provisions of the Constitution shall apply.

All other international agreements are ranked below the Constitution but take precedence over domestic law.

Plenary of the SCJN; SCJN; 10a. Period; Judicial Weekly of the Federation Gazette; P./J.20/2014 (10a); J; Publishing: Friday, 25 April 2014 9:32 h; Digital record: 2006224.

SCJN Rulings

The application of a DTA, in connection to the Income Tax Law (LISR) must be subject to the following rules: (i) the benefit of the DTA applies to those persons that prove to be residents of one of the contracting States; (ii) once the taxable event has been defined in domestic law, it is considered in order to classify it in one of the DTA´s items of income; (iii) having established the above, the tax rate applicable in accordance with domestic law must be compared with the maximum tax rate provided for in the DTA; and, (iv) if the DTA provides for a withholding tax rate lower than the one established in the domestic law, it is the treaty tax rate that will be directly applied by the withholding taxpayer (as long as domestic requirements are met).

SCJN;10a. Época; ; Judicial Weekly of the Federation Gazette;1a. CCXXXVI/2016 (10a.) ;TA; Publishing: Friday, September 30, 2016, 10:39 h; Digital record: 2012667

MLI

1. On June 7, 2017, Mexico signed the MLI.
2. On October 12, 2022, the MLI was ratified by the Mexican Senate.
3. On November 22, 2022, the “Decree approving the Status of the List of Reservations and Notifications upon Depositing the Instrument of Ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting” was published in the Federal Official Gazette.
4. On March 15, 2023, Mexico deposited the instrument before the Organization for Economic Cooperation and Development (OECD).
5. On June 19, 2023, the Decree Promulgating the MLI was published in the DOF.
6. On July 1, 2023, the MLI became effective in Mexico.
7. With respect to other required taxes other than withholding taxes, it is be applicable as of January 1st, 2024.

Federal Court of Administrative Justice (TFJA) Rulings

To determine the business profits concept for the application of the DTA, the definition provided in the domestic legislation should be considered (which is mainly focused on commercial activities). 

E.g., jurisprudence IX-J-SS-70[1] of June 2023 issued by the TFJA, ruled that technical assistance payments, for purposes of the Mexico-Netherlands DTA, are not deemed as business benefits. Consequently, domestic legislation should be applied, which provides for a withholding tax rate of 25% on technical assistance payments.

R.T.F.J.A. Novena Época. Año II. No. 18. Junio 2023. p. 64 IX-J-SS-70