Mexico Implements BEPS Action 4 To Limit Interest Deductibility

The Mexican government has set out to reform the tax system to include the OECD's recommended limits on interest deductibility in accordance with BEPS Action 4. Mexican tax reform will define 2020.

On October 30 2019, the Mexican Congress approved the 2020 tax reform which, among other amendments and additions to several tax provisions, included the incorporation of a new subsection to Article 28 of the Mexican Income Tax Law in order to limit the deductibility of interest payable by companies in a given tax year in accordance with Action 4 of the OECD BEPS project.

Through the Statement of Intent (Exposición de Motivos in Spanish), the Executive Branch described that the use of related and non-related party interest is perhaps one of the simplest profit-shifting techniques available for international tax planning due to the mobility of money.