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On April 8, 2014, the Mexican tax authority released details of a Mexican Supreme Court (MSC) case that was decided on March 19, 2014. The court clarified that expenses allo- cated pro rata to a Mexican company f rom its foreig n parent may be deductible if the expenses and supporting documentation meet certain requirements. Although the MSC's decision does not set a binding precedent, it may be seen as persuasive as it comes from Mexico's highest court and provides insight on how ot her Mexican cour ts may appro ach t h is i ss ue in the future. It is expected, howev- er, t ha t t he Me x i c a n t a x authorit y w ill continue to challenge the deductibility of these expenses.
Background. Under Mexi- can law, pro rata expenses allo- cated to Mexican taxpayers are nondeductible when paid to nonresidents. To support the deductibility of these expens- es, many Mexican taxpayers that have been...