Mexico – Transfer Pricing (2025)

Legal framework and scope

Mexico’s transfer pricing regime is primarily set out in the Mexican Income Tax Law (MITL), notably Articles 76 (section XII), 179 and 180, complemented by provisions in the Hydrocarbons Revenues Law (Articles 51 and 53) for hydrocarbon-related operations and various administrative miscellaneous rules. Article 179 of the MITL incorporates comparability principles and expressly refers to the OECD Transfer Pricing Guidelines (TPG) as guidance for interpretation and application. For income tax purposes, the MITL defines related parties in Article 179: two or more persons are related when one participates, directly or indirectly, in the administration, control or equity of the other, or when a person or group of persons participates, directly or indirectly, in their administration, control or equity; partners of partnerships are considered related, as are head offices and permanent establishments among themselves.

Arm’s length principle and role of the OECD Guidelines

The arm’s length principle is embedded in Mexican law through the express reference to the OECD TPG in Article 179 of the MITL and Article 30 of the Hydrocarbons Revenues Law. The TPG are used as interpretative guidance and are applicable to transfer pricing issues in Mexico, meaning that OECD practices and comparability tests are applied in determining whether controlled transactions meet arm’s length conditions.

Definition of related parties

Article 179 of the MITL provides the legal definition applicable for transfer pricing purposes: related parties include those connected by direct or indirect participation in administration, control or equity, as well as persons or groups that by virtue of their participation are considered related. Head offices and permanent establishments are also considered related to each other and to persons deemed related under the Article. The country profile does not provide other quantitative thresholds or specific family relationship tests beyond those included in the MITL.

Methods and criteria for application

Article 180 of the MITL lists the transfer pricing methods and establishes a hierarchy. Taxpayers must first apply the Comparable Uncontrolled Price (CUP) method; only when the CUP is not appropriate may they use the other methods enumerated in Article 180: Resale Price, Cost Plus, Profit Split, Residual Profit Split, and the Transactional Net Margin Method (TNMM). This method hierarchy is implemented in a manner that aligns with the “most appropriate method” concept of the TPG, since the law contemplates an applicability test consistent with paragraph 2.2 of the TPG to determine the suitability of each method (Article 180 of the MITL).

Comparability and ranges

Mexico follows the comparability guidance in Chapter III of the OECD TPG by virtue of the MITL reference (Article 179). Although there is a formal preference for domestic comparables, limited availability of local comparables leads to frequent use of foreign comparables in practice. The use of secret comparables is permitted based on the Federal Fiscal Code (Articles 46, 48 and 69), but is case-specific and typically limited to on-site audits. Regarding statistical measures, Mexican rules require the use of the interquartile range; Article 180 of the MITL, its regulations and Article 302 require the interquartile range. Comparability adjustments are required where differences materially affect price or margins, and the law allows elimination of such differences through reasonable adjustments (Article 179 of the MITL).

Commodities and hydrocarbons sector

For controlled transactions involving hydrocarbons — oil, natural gas, condensates, natural gas liquids or methane hydrates — Articles 51 and 53 of the Hydrocarbons Revenues Law require the application of the CUP method and the use of prices and consideration amounts that would have been used between independent parties in comparable transactions. For other commodities, there is no specific domestic statutory guidance beyond the MITL’s reference to the OECD TPG; therefore, the OECD commodities guidance applies.

Intangibles, HTVI and intra-group services

The MITL does not contain comprehensive domestic rules specific to intangibles, although Article 179, section I(d) includes comparability guidance where intangibles are involved, and the TPG reference renders Chapter VI guidance applicable. Official positions 4/ISR/NV and 33/ISR/NV in Annex 3 of the 2025 Miscellaneous Rules include positions on the deductibility of royalty expenses for intangibles developed in Mexico and on comparability analysis in intangible transactions. There is no domestic rule specifically addressing Hard-to-Value Intangibles (HTVI) in the MITL, but the TPG HTVI guidance can be applied via the MITL reference. Regarding intra-group services, there is no specific MITL provision, but Article 179, section I(b) is relevant and administrative Rule 3.3.1.27 requires documentation to support the deductibility of pro-rata payments to foreign parties/service providers: taxpayers must evidence that services were actually rendered, provided a benefit to the Mexican taxpayer, were not duplicative, and that the consideration was at arm’s length (Article 28, section XVIII of the MITL; Rule 3.3.1.27).

Financial transactions and interest limitation rules

The MITL does not contain a separate, detailed chapter for financial transactions, but Article 179, section I(a) and the TPG guidance (Chapter X) are applicable through the reference to the OECD Guidelines. Mexico has implemented BEPS Action 4 measures: interest deduction limitations cap interest deductions that exceed 30% of EBITDA, applicable to taxpayers with interest expenses exceeding MXN 20,000,000 in a fiscal year. Mexico also maintains thin capitalization rules to limit interest deductions (Article 28, sections XXVII and XXXII of the MITL).

Cost contribution arrangements

Mexico allows Cost Contribution Arrangements and follows, in its domestic framework, guidance aligned with Chapter VIII of the OECD TPG.

Transfer pricing documentation and reporting (Master, Local, CbC, specific returns)

Mexico requires transfer pricing documentation consistent with the three-tier approach: Master File, Local File and Country-by-Country report (CbC), consistent with BEPS Action 13 and the TPG Chapter V. The obligation is established in Article 76 (sections IX, X and XII) and Article 76-A of the MITL and detailed in Miscellaneous Rules 3.9.7 to 3.9.13. Deadlines are: Local File must be filed in Spanish by May 15 of the year following the reporting fiscal year; Master File and CbC Report must be filed by December 31 of the year following the reporting fiscal year; the Master File may be submitted in English per Miscellaneous Rule 3.9.15. A specific transfer pricing informative return must be filed with the annual tax return or statutory tax report by March 31 of the following year (Article 76; Article 76-A; Miscellaneous Rules 3.9.7–3.9.13).

Documentation exemptions and thresholds

Certain taxpayers are exempted from preparing transfer pricing documentation: taxpayers whose business income in the immediately preceding fiscal year did not exceed MXN 13,000,000 and taxpayers whose income from professional services did not exceed MXN 3,000,000 are not obliged to prepare TP documentation, except if they transact with entities in low-tax jurisdictions or are contracting/assignation holders under the Hydrocarbons Revenues Law (Article 76, section IX, second paragraph; Article 76-A; Miscellaneous Rule 3.9.2.). Additionally, taxpayers are not required to prepare Master File and Local File unless they met one of the following: reported revenue in the prior year equal to or exceeding MXN 1,062,919,860 (approximately USD 51,000,000, updated annually), are included in the Mexican optional tax regime for groups, are state-owned companies, or are foreign resident legal entities with a permanent establishment in Mexico.

Penalties and compliance incentives

Mexican law establishes specific penalties for transfer pricing non-compliance. Article 76 provides penalties on omitted tax amounts unveiled by the tax authority of 55% or 75% of the omitted amount; penalties of 30% or 40% may apply to amounts declared as fiscal losses that exceed real losses. The Federal Fiscal Code, Article 32-D (IV), prevents the public sector from contracting with taxpayers who failed to submit required tax returns, a provision applicable to Article 76-A obligations. Failure to report transactions with related parties as required by Article 76 may result in fines under Articles 81-XVII and 82-XVII ranging from MXN 99,590 to MXN 199,190. Failure to submit or inaccuracies in the related-party informative returns under Article 76-A are sanctionable under Articles 81-XL and 82-XXXVII with fines between MXN 199,630 and MXN 284,220. Failure to identify transactions executed with related parties residing abroad and report them in accounting records as per Article 76 incurs fines under Articles 83-XV and 84-XIII of MXN 2,260 to MXN 6,780 per transaction. These amounts may be adjusted for inflation and are set out in the MITL and the Federal Fiscal Code.

Safe harbours and simplification measures

Mexico provides a limited sectoral safe harbour for the maquiladora industry (Article 182 of the MITL). The safe harbour computes the taxable profit base as the maximum of either 6.9% of total asset value or 6.5% of total costs and expenses. Regarding the simplified and streamlined approach for baseline marketing and distribution activities from the Annex to Chapter IV of the TPG, Mexico has not yet implemented this approach in secondary regulation; temporary regulations are intended to be issued in the second half of 2025. Mexico respects the outcome of the simplified and streamlined approach applied by other covered jurisdictions in line with the Inclusive Framework commitment, and also respects outcomes applied by jurisdictions that are not covered jurisdictions.

Advance Pricing Agreements (APAs), Mutual Agreement Procedure (MAP) and dispute prevention/resolution

Mexico offers administrative mechanisms to prevent and resolve transfer pricing disputes, including rulings and Advance Pricing Agreements (unilateral, bilateral and multilateral) and Mutual Agreement Procedures. Relevant legal bases include the Federal Fiscal Code Articles 34, 34-A and 69-C to 69-H, and Miscellaneous Rules 2.1.32., 2.9.8. and 3.3.1.28. Unilateral APAs may apply for the fiscal year in which requested, the immediately preceding year, and up to three subsequent fiscal years; bilateral or multilateral APAs may have longer validity periods. Mexico’s MAP profile provides further details on Competent Authority procedures.

Year-end and secondary adjustments

Mexico permits periodic (in-year) and year-end adjustments provided they are recorded in the accounts before the fiscal year-end to ensure consistency between tax and accounting records; these adjustments must be reflected in Form 76 (Relevant Transactions), as required by Article 31-A of the Federal Fiscal Code and Miscellaneous Rules 3.9.1.1 to 3.9.1.5. Downward corresponding adjustments are not unilaterally recognized outside the MAP context; the administrative recognition of such adjustments is only allowed in the framework of a mutual agreement procedure. Secondary adjustments are recognized under Mexican law and may be treated as deemed dividends in accordance with Articles 11, section II; 140, sections III and VI; and 164, section I of the MITL. Miscellaneous Rule 3.9.1.1, section V, addresses related aspects.

Attribution of profits to permanent establishments

Regarding tax treaties and Article 7 of the OECD Model Tax Convention, the profile indicates that Mexico’s treaty network includes a mix of treaty texts: six treaties contain Article 7 as it read before 2010, fifty-four treaties include other variations (for example following the UN Model approach or including anti-abuse clauses), and none of Mexico’s 60 treaties adopt the post-2010 version of Article 7. Mexico does not apply the Authorized OECD Approach (AOA); instead, the domestic approach attributes to a permanent establishment the profits it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions, dealing wholly independently with the enterprise of which it is a PE. The MITL also contains domestic provisions regarding attribution of income and determination of income and authorized deductions for establishments (Articles 2, 3, 11, 16, 17, 18, 26 and 180 of the MITL).

Other relevant information and upcoming developments

The profile notes that Amount B regulations are expected to be issued in the second half of 2025. Where the domestic law is silent, the OECD TPG continue to serve as the reference for handling cases not specifically addressed in Mexican legislation.

Conclusion

Mexico’s transfer pricing framework rests on explicit domestic statutory provisions in the MITL, with a clear referral to the OECD TPG. It prescribes a method hierarchy favoring the CUP, mandates three-tiered documentation with specified deadlines and language rules, provides a limited maquiladora safe harbour, implements BEPS Action 4 interest limitation rules and thin capitalization measures, and furnishes dispute prevention and resolution tools including APAs and MAP. The framework allows year-end adjustments and contemplates secondary adjustments, while several practical and administrative details are governed by miscellaneous rules and forthcoming secondary regulations.

References

For further reference and OECD country profiles: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html