Changing tax conditions for foreign investors in Mexico

By Sergio Guerrero Rosas, Guerrero y Santana, S.C.

In order to make its tax terms more attractive to foreign investors, Mexico has altered its adjustment mechanism (similar to the windfall profits tax in other countries) for oil exploration bidders, which will occur should oil prices rise beyond certain levels or if hydrocarbon discoveries turn out to be greater than anticipated. As a result,
a pre-tax profit margin of 20% (up from 15%) has been set before that adjustment mechanism kicks in.

Elsewhere, energy-intensive industries, such as manufacturing, can look forward to falling electricity prices. The push towards clean energy is incentivised with clean energy certificates and a tax on carbon fossil fuels set at USD 3.50 per ton of carbon dioxide equivalent. Meanwhile, similar to how income tax is reported, tax remittances are to be submitted on a monthly basis.

These developments are all viewed as essential features of Mexico’s energy reform and policy of opening up the oil,  electricity and gas sectors for private investment, and are part of an overarching vision to create a more competitive and tax-efficient landscape that will push the economy onto the global stage.

Over USD 20 billion in direct foreign investment may be generated in the first year of the energy overhaul alone, which comes with a plethora of tax legislation and reporting requirements, all designed to make tax collection more effective and increase investment appeal.

The fall in oil prices has forced Mexico’s hand somewhat in making its tax terms more attractive to the overseas investor – oil revenues currently account for over 10% of the country’s exports. Consequently, as long as international markets continue to fluctuate, Mexico will respond accordingly.


Prof Sergio Guerrero Rosas

Prof Sergio Guerrero Rosas

Guerrero y Santana, S.C., Tijuana, Baja California, Mexico
T: : +52 333 120 05 38
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Guerrero y Santana S.C. provides its clients with a wide range of tax, legal and consulting services. The firm makes comprehensive evaluations of its clients’ businesses and draws on the expertise of its professionals to offer the best solution available.
Prof Sergio Guerrero Rosas, Managing Director at Guerrero y Santana, has over 25 years’ experience advising companies from SMEs to multinationals, as well as individuals, on tax and estate planning. He is also the Latin American Chairman of International Taxation Practice Group and Global Vice Chairperson of the Trust & Estate Planning Practice Group.

published: April 2015

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