Mexico, US reach agreement on maquiladora taxation

Please note: This item is from our archives and was published in 2016. It is provided for historical reference. The content may be out of date and links may no longer function.

US companies with maquiladora operations in Mexico will be able to avoid double taxation by entering into a unilateral advance pricing agreement (APA) with Mexico’s tax agency, the Servicio de Administración Tributaria (SAT), the US’s Internal Revenue Service (IRS) announced.

The IRS’s position comes as a result of two years of negotiations between the US and Mexican competent authorities to address a backlog of approximately 700 pending APA requests from the maquiladora industry. Maquiladoras, mostly located along Mexico’s border with the United States, manufacture goods for export, typically under a contract manufacturing arrangement with a foreign multinational.

The new agreement between the countries updates and expands on a 1999 agreement, which governed transfer pricing and other aspects of maquiladoras owned by US multinational corporations. Under the new agreement, the two countries are implementing a transfer-pricing framework that both countries have agreed will produce arm’s-length results. It allows qualifying taxpayers with pending unilateral APA requests to elect to apply the new framework, and the IRS will treat the transfer-pricing results as arm’s-length under Sec. 482 of the Internal Revenue Code.

Taxpayers that elect not to apply the new framework may apply the safe harbours provided for in the 1999 agreement or request a bilateral APA from the Mexican and US competent authorities under the provisions of IRS Rev. Proc. 2015-41.

The SAT is expected to release details of how to make the election and the steps taxpayers must take regarding pending unilateral APA requests shortly. The IRS also said it will release future guidance on the tax consequences of the unilateral APAs.

Alistair M. Nevius (anevius@aicpa.org) is CGMA Magazine’s editor-in-chief, tax.

Up Next

With greenhouse gas reporting, sizable gaps persist

By Bryan Strickland
September 5, 2025
Large companies in the UK are making progress as more sustainability reporting requirements approach, but they could face significant challenges when seeking assistance from smaller companies in their supply chain.
Advertisement

LATEST STORIES

With greenhouse gas reporting, sizable gaps persist

Accountability: Inescapable, challenging, and valuable

US business outlook brightens somewhat despite trade, inflation concerns

Elevating productivity through strategic business partnering

Mark Koziel Q&A: Talent, sense of community, profession opportunities

Advertisement
Read the latest FM digital edition, exclusively for CIMA members and AICPA members who hold the CGMA designation.
Advertisement

Related Articles

UK budget: National Insurance rate to increase for employers