Mexico City GMT -6
EY
+52 (55) 5283-1300, Torre Paseo, “Antara Polanco” +52 (55) 5283-1400
5th Floor
Av. Ejército Nacional No. 843-B Col. Granada 11520 Mexico City Mexico
Principal Tax Contacts
Oscar Ortiz
Koen van ‘t Hek
Fax: +52 (55) 1101-8464
+52 (55) 5283-1468
Email: oscar.ortiz@mx.ey.com
+52 (55) 1101-6439
Mobile: +52 1-55-5404-2960
Email: koen.van-t-hek@mx.ey.com
Enrique Rios +52 (81) 8152-1850 (resident in Monterrey, Nuevo Léon)
Tax Policy and Controversy
Jorge Libreros
Global Compliance and Reporting
Jesus Montaño
Mobile: +52 1-81-1516-5169
Email: enrique.rios@mx.ey.com
+52 (55) 5283-1439
Mobile: +52 1-55-3201-7516
Email: jorge.libreros@mx.ey.com
+52 (686) 568-4555 (resident in Tijuana,
Email: jesus.montano@mx.ey.com Baja California)
International Tax and Transaction Services – International Corporate Tax Advisory
Alfredo Garcia
+52 (55) 1101-6433
Email: alfredo.garcia.lopez@mx.ey.com Mauricio Garcia +52 (55) 5283-1300
Terri Grosselin
Email: mauricio.garcia@mx.ey.com
Mexico: +52 (55) 1101-6469
Miami: +1 (305) 415-1344
Email: terri.grosselin@ey.com
Estela Miranda +52 (55) 1101-8404
Email: estela.miranda@mx.ey.com
Jóse Olmedo +52 (81) 8152-1831
Email: jose.olmedo@mx.ey.com
Jóse Pizarro +52 (55) 5283-1458
Email: jose.pizarro@mx.ey.com
Alejandro Polanco
+52 (55) 5283-1300, Ext. 3440 (resident in Querétaro, Querétaro)
Email: alejandro.polanco@mx.ey.com
Abril Rodriguez +52 (55) 1101-7208
Email: abril.rodriguez@mx.ey.com
Jorge Bibiano Ruiz +52 (81) 8152-1825 (resident in Monterrey, Nuevo Leon)
Catherine Thibault
Email: bibiano.ruiz@mx.ey.com
+52 (55) 5283-1329
Email: catherine.thibault@mx.ey.com
Koen van ‘t Hek +52 (55) 1101-6439
Mobile: +52 1-55-5404-2960
Email: koen.van-t-hek@mx.ey.com
International Tax and Transaction Services – Operating Model Effectiveness (OME)
Mauricio Garcia
+52 (55) 5283-1300
Email: mauricio.garcia@mx.ey.com
Estela Miranda + 52 (55) 1101-8404
Email: estela.miranda@mx.ey.com
Koen van ‘t Hek +52 (55) 1101-6439
Mobile: +52 1-55-5404-2960 Email: koen.van-t-hek@mx.ey.com
International Tax and Transaction Services – Tax Desks Abroad
Enrique Gonzalez Cruz +1 (713) 750-8107 (resident in Houston)
Email: enrique.cruz@ey.com
Raúl Moreno +81 (3) 3506-2016 (resident in Tokyo) Email: raul.moreno@jp.ey.com
Lourdes Libreros +44 7771-340-071 (resident in London) Email: lourdes.libreros@uk.ey.com
Enrique Perez Grovas +1 (212) 773-1594 (resident in New York)
Email: enrique.perezgrovas@ey.com
Jose Manuel Ramirez +1 (212) 773-3144 (resident in New York)
Email: jose.manuel.ramirez@ey.com
Alejandra Sánchez +1 (312) 879-3597 (resident in Chicago) Email: alejandra.sanchez@ey.com
International Tax and Transaction Services – International Capital Markets and Financial Services Organization
Oscar Ortiz +52 (55) 5283-1468 Email: oscar.ortiz@mx.ey.com
International Tax and Transaction Services – Transfer Pricing
Mónica Cerda +52 (55) 5283-1405
Mobile: +52 1-55-2301-4065 Email: monica.cerda@mx.ey.com Ricardo Cruz +52 (55) 6648-1610 Email: ricardo-manuel.cruz@mx.ey.com
Mauricio Fuentes +52 (55) 4488-3681 Email: mauricio.fuentes@mx.ey.com
Ricardo Gonzalez +52 (81) 8152-1821 (resident in Monterrey, Nuevo Léon) Email: ricardo.gonzalezmtz@mx.ey.com
Enrique Gonzalez Cruz +1 (713) 750-8107 (resident in Houston) Email: enrique.cruz@ey.com
Alma Gutierrez +52 (55) 1101-6445 Email: alma.gutierrez@mx.ey.com
Gabriel Lambarri +52 (55) 1101-8437 Email: gabriel.lambarri@mx.ey.com
Marco Molina +52 (81) 8152-1830 (resident in Monterrey, Nuevo Léon) Email: marco.molina@mx.ey.com
Andrés Olvera +52 (33) 3884-6106 (resident in Guadalajara, Jalisco) Email: andres.olvera@mx.ey.com Sakkara Simon +52 (33) 3884-6135 (resident in Guadalajara, Jalisco) Email: sakkara.simon@mx.ey.com
Business Tax Advisory
Rodrigo Ochoa
Mining and Metals
Koen van ‘t Hek
+52 (55) 5283-1493 Mobile: +52 1-55-3722-8265 Email: rodrigo.ochoa@mx.ey.com
+52 (55) 1101-6439
Mobile: +52 1-55-5404-2960 Email: koen.van-t-hek@mx.ey.com
Oil and Gas Tax
Rodrigo Ochoa
People Advisory Services
Carlos Sandoval
+52 (55) 5283-1493
Mobile: +52 1-55-3722-8265
Email: rodrigo.ochoa@mx.ey.com
+57 (1) 484-7397 (resident in Bogotá, Colombia)
Email: carlos.sandoval@co.ey.com Carlos de la Fuente +52 (55) 1101-6473
Email: carlos.de-la-fuente@mx.ey.com
Indirect Tax and Customs and International Trade
Rocío Mejía
+52 (55) 5283-8672
Mobile: +52 1-55-2699-8159
Email: rocio.mejia@mx.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Ana Alvarez +52 (81) 8152-1859
Email: ana.alvarez@mx.ey.com
Rodrigo Castellanos +52 (55) 5283-1463
Mobile: +52 1-55-2955-2538
Email: rodrigo.castellanos@mx.ey.com
Enrique Rios +52 (81) 8152-1850 (resident in Monterrey, Nuevo Léon)
Mobile: +52 1-81-1516-5169
Email: enrique.rios@mx.ey.com
Legal Services
Carina Barrera +52 (55) 1101-7295
Email: carina.barrera@mx.ey.com
Tatiana Treviño +52 (55) 1101-7295
Email: tatiana.trevino@mx.ey.com
Chihuahua, Chihuahua GMT -7
EY
+52 (614) 425-3570 Centro Ejecutivo Punto Alto II Fax: +52 (614) 425-3580 Piso 3
Av. Valle Escondido 5500 Fracc. Desarrollo el Saucito 31125 Chihuahua, Chihuahua Mexico
Business Tax Advisory
Gilberto Ceballos
+52 (614) 425-3567
Mobile: +52 1-61-4184-4875
Email: gilberto.ceballos@mx.ey.com
Ciudad Juarez, Chihuahua GMT -7
+52 (656) 648-1608/14 Paseo de la Victoria 4150-A
EY
Fax: +52 (656) 648-1615 Fracc. Misión de los Lagos Col. Misión de los Lagos 32688 Ciudad Juarez, Chihuahua Mexico
Business Tax Advisory
Gilberto Ceballos
+52 (656) 648-1608/14 x2916
Mobile: +52 1-61-4184-4875
Email: gilberto.ceballos@mx.ey.com
Guadalajara, Jalisco GMT -6
EY
Av. Patria No.2085
Col. Puerta de Hierro
Corporativo Andares Patria, Piso 2 45116 Guadalajara, Jalisco
Mexico
+52 (33) 3884-6100
Fax: +52 (33) 3884-6111
International Tax and Transaction Services – Transfer Pricing Andres Olvera
+52 (33) 3884-6101
Mobile: +52 1-33-3170-5707
Email: andres.olvera@mx.ey.com
Business Tax Advisory
Mario Rios
+52 (33) 3884-6127
Email: mario.rios@mx.ey.com
Monterrey, Nuevo Léon GMT -6
EY
Equus 335
Piso 12, 14
Col. Valle del Campestre 66265 San Pedro Garza García Monterrey, Nuevo Léon
Mexico
Business Tax Services
Enrique Rios
+52 (81) 8152-1800
Fax: +52 (81) 8152-1839
+52 (81) 8152-1850
Mobile: +52 1-81-1516-5169 Email: enrique.rios@mx.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory Jose Olmedo
+52 (81) 8152-1831
Mobile: +52 1-81-8366-0677 Email: jose.olmedo@mx.ey.com
Jorge Bibiano Ruiz +52 (81) 8152-1825 Email: bibiano.ruiz@mx.ey.com
International Tax and Transaction Services – Transaction Tax Advisory Enrique Rios
+52 (81) 8152-1850
Mobile: +52 1-81-1516-5169 Email: enrique.rios@mx.ey.com
International Tax and Transaction Services – Transfer Pricing
Ricardo González
+52 (81) 8152-1821
Mobile: +52 1-81-1660-2849 Email: ricardo.gonzalezmtz@mx.ey.com
Marco Molina +52 (81) 8152-1830 Email: marco.molina@mx.ey.com
Business Tax Advisory – Tax Controversy
Juan Pablo Lemmen
Global Compliance and Reporting
Marco Alvarez
+52 (81) 8152-1828
Email: jpablo.lemmen@mx.ey.com
+52 (81) 8152-1873
Email: marco.alvarez@mx.ey.com
Leonardo Gomez +52 (999) 738-8181
Indirect Tax
Javier Coppel Donnadieu
Email: leonardo.gomez@mx.ey.com
+52 (81) 8152-1856
Email: javier.coppel@mx.ey.com
Puebla, Puebla GMT -6
EY
+52 (222) 237-9922
Boulevard de los Reyes No. 6431 Fax: +52 (222) 237-9926 Complejo Natyvo
San Bernardino
72820 Puebla, Puebla Mexico
Global Compliance and Reporting
Hector Gama
+52 (55) 1101-6436
Email: hector.gama@mx.ey.com
Querétaro, Querétaro GMT -6
EY
+52 (442) 216-6429
Localidad El Marqués Autopista KM 206 Fax: +52 (442) 216-6749
Col. Fracc. Monte Miranda N° Exterior 5 Int Torre, Complejo Nouvalia, Piso 8 Municipio El Marqués
76246 Querétaro, Querétaro Mexico
International Tax and Transaction Services – International Corporate Tax Advisory
Alejandro Polanco
Global Compliance and Reporting Eduardo Martinez
+52 (55) 5283-1300, Ext. 3440
Email: alejandro.polanco@mx.ey.com
+52 (81) 8152-1801
Email: eduardo.martinez@mx.ey.com
Tijuana, Baja California GMT -8
EY +52 (664) 681-7844 Blvd. Agua Caliente 4558-704 +52 (664) 686-4009
Col. P. Torres de Agua Caliente Fax: +52 (664) 681-7876 22420 Tijuana, Baja California Mexico
Global Compliance and Reporting
Jesus Montaño
A. At a glance
Corporate Income Tax Rate
Capital Gains Tax Rate
Branch Tax Rate
Withholding Tax
+52 (686) 568-4555
Email: jesus.montano@mx.ey.com
30 (a)
30 (b)
30
Dividends 10 (c)
Interest
Paid on Negotiable Instruments 10 (d)(e) Paid to Banks 10 (d)(f) Paid to Reinsurance Companies 15 (d) Paid to Machinery Suppliers 21 (e) Paid to Others 35 (d)
Royalties
From Patents and Trademarks 35 (d) From Know-how and Technical Assistance 25 (d) From Railroad Cars 5 (d)
Branch Remittance Tax 10 (c)
Net Operating Losses (Years)
(a) A 10% tax is imposed for employee profit sharing (see Section D). (b) The capital tax rate for foreign residents may be 25% or 35% (see Section B). (c) This tax applies to dividends paid out of profits generated after 2013 (see Section B).
(d) This is a final tax applicable to nonresidents. Payments to tax havens are generally subject to a 40% withholding tax. (e) This rate can be reduced to 4.9% if certain requirements are met. (f) A reduced rate of 4.9% is granted each year to banks resident in treaty countries.
B. Taxes on corporate income and gains
Corporate income tax. Corporations resident in Mexico are tax able on their worldwide income from all sources, including profits from business and property. A nonresident corporation in Mexico is subject to profits tax on income earned from car rying on business through a permanent establishment in Mexico and on Mexican-source income. Corporations are considered residents of Mexico if their principal place of management is located in Mexico.
Corporations are taxed on profits in Mexico by the federal govern ment only. Resident corporations are not subject to tax on dividends received from other Mexican residents. Dividends paid to individuals and nonresidents are subject to a 10% withholding tax.
The income tax law recognizes the effects of inflation on the fol lowing items and transactions:
• Depreciation of fixed assets
• Cost on sales of fixed assets
• Sales of capital stock (shares)
• Monetary assets and liabilities
• Tax loss carryforwards
The tax basis of investments in capital stock may be adjusted for inflation at the time of capital stock reductions or liquidation. Taxes are also indexed for inflation in certain circumstances.
Tax rate. Corporations are subject to federal corporate income tax at a rate of 30%.
Capital gains. Mexican tax law treats capital gains obtained by Mexican corporate residents as normal income and taxes them at the regular 30% tax rate. However, losses on sales of shares are restricted and may only be used to offset gains from the sale of shares. Nonresidents are subject to a 25% tax rate on gross income or, if certain requirements are met, a 35% rate on net income from the sale of shares. Capital gains derived from sales of publicly traded shares by individuals or non-Mexican residents are taxed at a rate of 10%. To determine the deductible basis for sales of real estate, fixed assets and shares, the law allows for indexation of the original cost for inflation.
Administration. The tax period always ends on 31 December and cannot exceed 12 months. The tax return must be filed by the end of the third month following the tax year-end. Monthly tax install ments must be paid during the corporation’s tax year.
Dividends. Resident individuals and nonresident shareholders of a Mexican corporation are subject to a 10% income tax on dividends received that are paid out of profits generated after 2013. Dividends are not subject to corporate income tax at the distributing company level if the distribution is from previously taxed earnings and if the distributing corporation has sufficient accumulation in its “net after-tax profit” (CUFIN) account to cover the dividend. If the dividend is in excess of the CUFIN account, the dividend is also taxed at the distributing company level at a rate of 30% on a grossed-up basis. The following is an illustration of how to compute the annual net after-tax profit for the CUFIN account.
MXN
Corporate taxable income 1,000
Income tax (30%) (300)
Paid profit sharing to employees (estimated) (150)
Nondeductible expenses (50)
Net after-tax profit added to the CUFIN account 500
If the CUFIN balance is not sufficient to cover an earnings dis tribution, the remaining amount triggers corporate income tax on the dividend grossed up by a factor of 1.4286. The corporate in come tax rate is then applied to the grossed-up dividend. The following is an illustration of the calculation.
MXN
Calculation of excess dividend
Amount of dividend 700
Dividend from CUFIN 500 Excess dividend 200
Tax on excess dividend
Grossed-up income (Gross-up factor of 1.4286 x excess dividend of MXN200) 285.72
Tax at 30% 85.72
Income tax paid on distributed profits in excess of the CUFIN balance may be credited against corporate income tax in the year in which the dividend is paid and in the following two years.
Similar rules apply to remittances abroad by branches of foreign corporations.
Foreign tax relief. A tax credit is allowed for foreign income tax paid or deemed paid by Mexican corporations, but the credit is generally limited to the amount of Mexican tax incurred on the foreign-source portion of the company’s worldwide taxable in come. This calculation must generally be made on a country-bycountry basis.
C. Determination of trading income
General. Taxable profits are computed in accordance with gener ally accepted accounting principles, with certain exceptions, in cluding the following: • Nondeductibility of penalties and unauthorized donations
• Nondeductibility of increases to reserves for bad debts, obso lescence, contingencies, indemnities and so forth
• Monetary gain on debts, and monetary loss on credits, to rec ognize the effect of inflation
• Nondeductibility of 53% of exempt salaries (percentage may be decreased to 47% if the exempt salaries are not reduced from previous year)
• Nondeductibility of payments to residents of low-tax jurisdic tions, unless business activity and substance requirements are met
Employee profit-sharing (see Section D) is effectively deductible.
Inventories. Inventories are deducted on a cost-of-sales basis.
Depreciation. The straight-line method is used to depreciate tan gible fixed assets and to amortize intangible assets. Depreciation must be computed using the annual percentages set by law. The depreciation of new assets must be computed on a proportional basis relating to the months in which the assets are used. Depreciation is computed on original cost of fixed assets, with the amount of depreciation indexed for inflation as measured by price indices.
The following are the maximum annual depreciation rates for certain types of assets.
Asset Rate (%)
Buildings 5 Motor vehicles 25 Office equipment 10
Computers
Mainframe equipment 30
Peripheral equipment 30 Plant and machinery General rate 10
Machinery and equipment used in the generation and distribution of electricity 5 Machinery and equipment used in the mining industry 12
Machinery and equipment used in the construction industry 25 Machinery and equipment related to hydrocarbon infrastructure 10 Environmental machinery and equipment 100
Relief for losses. Net operating losses may be carried forward for 10 years.
Groups of companies. A Mexican holding company may obtain an authorization to effectively compute income tax on a consolidated basis (integration regime), but each company of the group is re sponsible for filing and paying the tax individually. This option is subject to several rules and limitations, including a recapture of benefits.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate (%)
Value-added tax, on any supply of goods or services and on imports
General rate 16
Certain foods and medicines and exports 0 Excise tax, on the supply of goods or services, excluding exports, and on imports; goods and services subject to tax include food with high caloric density, alcoholic beverages, alcohol, tobacco, gasoline, diesel and telecom services Various Real estate acquisition tax; local tax on market value of real estate transferred (approximate rates) 2 to 4.5 State tax on salaries 2 to 3 Residence tax, on each employee’s salary (approximate rate) 5
Employee profit sharing, on taxable profits of resident entities and permanent establishments of nonresident entities (loss carryforwards may not be deducted) 10
Social security contributions, on salaries up to a specified amount; paid by Employer (approximate rate) 15 Employee (approximate rate) 4
E. Miscellaneous matters
Foreign-exchange controls. Mexico has no foreign-exchange con trols.
Mandatory Disclosure Regime. Since 2020, disclosure of certain schemes considered as aggressive tax planning is required. Penalties up to 75% and denial of tax benefits may be imposed.
Transfer pricing. Mexico has transfer-pricing rules based on Organisation for Economic Co-operation and Development (OECD) standards. Acceptable transfer-pricing methods include the comparable uncontrolled price method, the resale price method, the cost-plus method, the profit-split method, the residu al profit-split method and the transactional net-margin method. In certain cases, specific appraisals are used. Transactions between related parties are subject to greater scrutiny. It may be possible to reach transfer-pricing agreements in advance with the tax au thorities. These agreements may apply for a period of up to five years.
Under the 2016 tax reform, beginning in 2016, certain Mexican taxpayers must file additional transfer-pricing documentation, including a Local File, a Master File and Country-by-Country Reports, as inspired by Action 13 of the Base Erosion and Profit Shifting report.
Interest expense limitation rules. Interest deductions on crossborder related-party debt may be disallowed if the debt-to-equity ratio exceeds 3 to 1. In addition, as a general rule, net interest expense cannot exceed 30% of taxable earnings before interest, taxes, depreciation and amortization.
Anti-abuse rules. Mexico has enacted a general anti-abuse rule that allows the tax authorities in certain instances to recharacter ize transactions that lack business purpose. In addition, a busi ness purpose is required for most reorganization transactions to be considered tax free.
F. Treaty withholding tax rates
Patent and know-how
Dividends (l) Interest royalties % % %
Argentina 10/15 (a) 12 10/15
Australia 0/15 (k) 10/15 (e) 10
Austria 5/10 (d) 10 10
Bahrain (v) 4.9/10 (n) 10 Barbados 5/10 (d) 10 10
Belgium 10 5/10 (n) 10
Brazil 10/15 (a)(b) 0/15 (b) 15 (b)
Canada 5/15 (d) 10 10 (g)
Chile 5/10 (u) 15 (b) 15 (b)
China Mainland 5 10 10 Colombia 0 (w) 5/10 (n) 10 (b) Czech Republic 10 10 10
Denmark 0/15 (a) 5/15 (n) 10 Ecuador 5 10/15 (m) 10
Estonia 0 4.9/10 (n) 10 Finland 0 10/15 (h) 10
France 0/5 (c) 5/10/15 (b)(h) 10/15 (b)
Germany 5/15 (d) 5/10 (n) 10 Greece 10 10 10
Hong Kong SAR 0 (w) 4.9/10 (n) 10
Hungary 5/15 (d) 10 10
Iceland 5/15 (d) 10 10
India 10 10 10
Indonesia 10 10 10
Ireland 5/10 (d) 5/10 (n) 10
Israel 5/10 (f) 10 10
Italy 15 10/15 (b) 15
Jamaica 5/10 (a) 10 10
Japan 0/5/15 (o) 10/15 (e) 10
Korea (South) 0/15 (k) 5/15 (n) 10
Kuwait 0 (w) 4.9/10 (n) 10
Latvia 5/10 (d) 5/10 (n) 10
Lithuania 0/15 (k) 10 10
Luxembourg 8/15 (d) 10 10
Malta 0 (w) 5/10 (n) 10
Netherlands 0/5/15 (d)(s) 5/10 (p) 10
New Zealand 15 (b) 10 10
Norway 0/15 (a) 10/15 (t) 10
Panama 5/7.5 (a) 5/10 (n) 10
Peru 10/15 (a) 15 15
Philippines 5/10/15 (y) 12.5 15
Poland
Patent and know-how
Dividends (l) Interest royalties % % %
5/15 (a) 10/15 (e) 10
Portugal 10 10 10
Qatar 0 (w) 5/10 (n) 10
Romania 10 (d) 15 15
Russian Federation 10 10 10
Saudi Arabia 5 5/10 (p) 10
Singapore 0 5/15 (n) 10
Slovak Republic 0 10 10
South Africa 5/10 (d) 10 10
Spain 0/10 (a) 4.9/10 (b)(h) 10 (b)(g)
Sweden 0/5/15 (d) 10/15 (q) 10
Switzerland 0/15 (d) 5/10 (p) 10
Turkey 5/15 (a) 10/15 (q) 10
Ukraine 5/15 (a) 10 10
United Arab
Emirates 0 (w) 4.9/10 (n) 10
United Kingdom 0/15 (x) 5/10/15 (j) 10
United States 0/5/10 (b)(d) 4.9/10/15 (r) 10
Uruguay 5 10 10
Non-treaty
jurisdictions 10 4.9/10/21/35 (i) 25/35 (i)
(a) The lower rate applies if the recipient is a corporation owning at least 25% (20% under the Brazil treaty) of the shares of the payer. Under the Panama treaty, the lower rate applies if the recipient owns at least 25% of the shares of the payer.
(b) These treaties have a most favorable nation (MFN) clause with respect to interest and/or royalties. Under the MFN clause in the Chile treaty, the with holding tax rate for interest may be reduced to 5% for banks or 10% for other recipients and the withholding tax rate for royalties may be reduced to 10%, if Chile enters into a tax treaty with another country that provides for a lower withholding tax rate than 15% for such payments. Under the MFN clause in the France treaty, the withholding tax rate for interest and royalties is reduced if Mexico enters into a tax treaty with an OECD member that provides for withholding tax rates that are lower than the rates under the Mexico-France treaty. However, the rate may not be lower than 10% if the OECD member country is not a member of the European Union (EU). Under the Italy treaty, the MFN clause applies only to interest. It may reduce the withholding tax rate for interest to as low as 10% only if Mexico enters into a treaty with an EU country that provides for a withholding tax rate for interest of less than 15%. Under the MFN clause in the Spain treaty, the withholding tax rates for interest and royalties may be reduced if Mexico enters into a tax treaty with an EU country that provides for withholding tax rates that are lower than the rates under the Mexico-Spain treaty. Under the Brazil treaty, if this country agrees with another country regarding a lower rate for dividends, interest or royalties, such rate will apply. For interest and royalties, the applicable rate may not be lower than 4.9% and 10%, respectively. Under the New Zealand treaty, if this country agrees with another country regarding a lower rate for dividends, such rate will apply. Under the MFN clause in the Colombia treaty, the withholding tax rate for royalties related to technical services and assistance will be automatically reduced if Colombia enters into a tax treaty with a third country that provides a lower rate. The standard rate for interest and for patent and know-how royalties under all of the above treaties is gener ally 15%. However, as a result of the operation of the MFN clause, the lower rates listed in the table may apply in certain circumstances.
(c) The 0% rate applies if the recipient of the dividends is the effective benefi ciary of the dividends. The 5% rate applies if the recipient is a company that is resident in France and if more than 50% of such recipient is owned by residents of countries other than France or Mexico.
(d) The 5% rate applies if the recipient is a corporation owning at least 10% of the shares of the payer. Under the US treaty, the 0% rate applies if the recipient owns 80% of the voting shares and if other requirements are met. Under the Switzerland treaty, the 0% rate applies if the recipient is a corporation owning at least 10% of the shares of the payer or if the beneficiary of the dividend is a pension fund. Under the Sweden treaty, the 0% rate applies if the recipient is a corporation owning at least 25% of the voting shares of the payer of the dividends and if at least 50% of the voting shares of the company that is the effective beneficiary of the dividends is owned by residents of that contract ing state. Under the Luxembourg treaty, the 8% rate applies to Mexico if the recipient is a corporation that owns at least 10% of the voting shares of the payer.
(e) The 10% rate applies to interest derived from loans granted by banks and insurance companies. Under the Germany treaty, the 10% rate also applies to interest paid to pension funds. Under the Australia and Japan treaties, the 10% rate also applies to interest paid on bonds or with respect to sales by suppliers of machinery and equipment. Under the Poland treaty, the 10% rate also applies to interest paid on publicly traded securities.
(f) The 5% rate applies if the recipient is a corporation that owns at least 10% of the shares of the payer and if the tax levied in Israel is not less than the cor porate tax rate.
(g) The effective beneficiary of royalties is subject to withholding tax on the gross payments. Royalties on cultural works (literature, music and artistic works other than films for movies or television) are not subject to withhold ing tax if they are taxed in the recipient’s country.
(h) A 10% rate applies to interest paid on bank loans or publicly traded bonds, as well as to interest paid with respect to sales by suppliers of machinery and equipment.
(i) See Section A and the applicable footnotes in the section.
(j) The 5% rate applies if the beneficial owner of the interest is a bank or insur ance company or if the interest is derived from bonds or securities that are regularly and substantially traded on a recognized securities market. The 10% rate applies to interest paid by a bank or by a purchaser with respect to a sale on credit of machinery if the seller is the beneficial owner of the interest. The 15% rate applies to other interest.
(k) The 0% rate applies if the recipient is a corporation owning at least 10% of the shares of the payer.
(l) Under Mexican domestic tax rules, dividends are subject to a 10% withhold ing tax rate. As a result, treaty rates in excess of the 10% rate should not apply.
(m) Beginning in the sixth year the treaty is in effect, the 15% rate is reduced to 10% if the beneficial owner of the interest is a bank. For the first five years, however, the 15% rate applies to such interest.
(n) The lower rate applies if the beneficial owner of the interest is a bank. Under the Colombia treaty, a 0% rate also applies if the beneficial owner of the interest is an insurance company. Under the Estonia treaty, the 4.9% rate also applies if the beneficial owner is a pension fund.
(o) The 5% rate applies if the recipient is a corporation owning at least 25% of the shares of the payer. The 0% rate applies if the condition described in the preceding sentence is satisfied and if both of the following conditions are satisfied:
• The recipient’s shares are regularly traded on a recognized stock exchange.
• More than 50% of the recipient’s shares are owned by one or any combina tion of the following:
The state of residence of the recipient.
Individuals resident in the state of residence of the recipient.
Corporations resident in the state of residence of the recipient if their shares are traded on a recognized stock exchange or if more than 50% of their shares are owned by individuals resident in the state of residence of the recipient.
(p) The 5% rate applies if the interest is derived from loans granted by banks, pension funds or insurance companies or if the interest is derived from bonds or securities that are regularly and substantially traded on a recognized securities market. The 10% rate applies to other interest.
(q) The 10% rate applies to interest derived from loans granted by banks.
(r) The 4.9% rate applies if the beneficial owner of the interest is a bank or insur ance company or if the interest is derived from bonds or securities that are regularly and substantially traded on a recognized securities market. The 10% rate applies to other interest.
(s) Under a protocol to the treaty with the Netherlands, the 5% rate is reduced to 0% if the dividends are paid on a shareholding that qualifies for the participa tion exemption under the corporate tax law of the Netherlands.
(t) The 10% rate applies if the beneficial owner of the interest is a bank.
(u) The 5% rate applies if the recipient is a corporation owning at least 20% of the shares of the payer.
(v) The treaty does not limit the withholding tax rate on this income.
(w) Dividends are taxed only in the country of residence of the recipient.
(x) In general, dividends are exempt if the beneficial owner is resident in the United Kingdom. However, if the dividend derives from rental income from real property located in Mexico through an investment vehicle and if the majority of the rents are distributed annually and are not subject to tax, the dividend rate may not exceed 15%.
(y) The 5% rate applies if the recipient owns at least 70% of the capital of the distributing company. The 10% rate applies if the recipient owns at least 10%. The 15% rate applies in all other cases.