On January 15, at the main auditorium of the Mixcoac campus of Universidad Panamericana, the open public forum “Application of Comparability Adjustments and Non-Binding Criteria in Transfer Pricing” will take place. This unprecedented event will allow taxpayers, their advisors, and tax authorities—represented by the Central Administrations of Transfer Pricing and the Central Administration for the Development of Transfer Pricing Strategies—to exchange views on critical aspects that will impact the taxation of multinational groups in Mexico.
Particular attention will be given to the proposal by the Mexican Tax Administration Service (SAT) regarding the application of comparability adjustments in transfer pricing, specifically the country risk adjustment:
https://www.gob.mx/sat/acciones-y-programas/preguntas-frecuentes-en-materia-de-precios-de-transferencia-con-respecto-a-ajustes-de-comparabilidad?tab=-
It is important to remember that, under this tax regime, taxpayers must demonstrate that their intercompany transactions are conducted under arm’s length conditions, as if they had been carried out with or between independent third parties in comparable transactions.
The View of Mexican Tax Authorities
From the perspective of Mexican tax authorities, the frequent use of foreign “comparable” companies to evaluate the reasonableness of an intercompany transaction involving a Mexican taxpayer—using transfer pricing methods that analyze transaction profitability at different levels—should consider the implementation of a country risk adjustment.
Under this approach, the sales of comparable companies from developed countries (such as the United States) would have to be increased by considering the additional return they would have hypothetically obtained if their operations had taken place in Mexico. This is based on the economic principle that higher risk demands higher returns, given the risk differential between the market of the comparable company and an emerging market (in this case, Mexico).
The country risk adjustment proposal has sparked extensive discussion among taxpayers and advisors, mainly due to its potential impact on the reference ranges used to validate the arm’s length condition of analyzed transactions. If consistently applied, this adjustment could increase the benchmark parameter and potentially put taxpayers at risk of non-compliance.
Public Forum: Discussion and Analysis
Recognizing the importance of this issue, the Transfer Pricing Commission of the National Federation of Economists has convened a public forum where leading professionals from major firms in Mexico, along with Mexican tax authorities, will analyze its implications.
Given the significance of this topic for corporate taxation in Mexico, the forum is open to all interested parties wishing to submit technical considerations for discussion and evaluation. This includes organizations, business groups, and firms that are not yet part of the Federation’s Transfer Pricing Commission.
- The discussion panels will address:
- Background on comparability adjustments
- Technical aspects of the country risk adjustment from an economic perspective
- Key points of the SAT Mexico proposal
- Alternative approaches to this adjustment
Technical Session: Review of Non-Binding Criteria
The forum will also include a technical session, where the non-binding criteria 39/ISR/NV (“Recognition of Unique and Valuable Transactions”) and 40/ISR/NV (“Modifications to the Value of Transactions with Related Parties Within the Interquartile Range”) will be reviewed.
This session will carefully examine how Mexican taxpayers’ contributions to the multinational group’s profitability are considered, as well as SAT’s proposal to disregard price or margin adjustments made by taxpayers—even when these adjustments fall within the interquartile range.
Don’t miss this important event! We look forward to seeing you there.
Register here: https://qcgtransferpricing.com/en/eventos/
