U.S. Companies Eyeball Higher Mexican Taxes

(CNN Money – Enrique Duarte)

Foreign investors may lose tax benefits if Mexico’s congress approves a bill that won’t allow businesses to consolidate results

Companies that have invested in Mexico could be affected if the Mexican congress approves a change that would put an end to tax benefits that allow businesses to consolidate their earnings and losses, in order to pay less taxes, said specialized foreign trade consultant firm IQOM. The changes proposed by the federal government are being analyzed by Congress and could be incompatible with expropriation rules under the North American Free Trade Agreement (NAFTA) that Mexico, Canada and the United States have had since 1994.

Mexican fiscal law today allows different companies with the same parent company, to pay taxes as if they were one single company.

This means any company, foreign or domestic, can deduct the losses of one of its subsidiaries against the earnings of another, but if the Mexican congress approves the changes, 4,862 companies (domestic and foreign) with operations in the country face paying higher taxes. Read more here.