Transfer Pricing Reforms In Mexico

On December 31^st, 2000, the Official Gazette of the Federation (the Mexican government’s bulletin where new laws and amendments are published) included amendments to article 58, section 14 of the Mexican Income Tax Law (MITL); a section that deals with transfer pricing regulations. These modifications have the potential to drastically change transfer pricing studies in Mexico and, more importantly, may uncover previous transfer pricing irregularities.

Although Mexico, as an OECD member, has adopted most of the OECD’s transfer pricing guidelines, there is an important omission in regards to the reasonable method criteria (which includes the preference of transaction based methods over profit based methods).¹ Although the Mexican transfer pricing legislation lists and describes the approved methods, it stops short of establishing a priority of methods. This latitude, coupled with the fact that since very few tax audits have been performed there have been even fewer challenges to the