Mexican Court Rules on Deductibility of Pro-Rata Payments

The Supreme Court of Justice in Mexico ruled in March on the deductibility of pro-rata expense allocated to a Mexican company by its foreign parent. Under article 28, section XVIII, of the Mexican Income Tax Act, outgoing pro-rata payments are not deductible when determining Mexican taxable income. However , the Court has ruled that if certain conditions are met, the allocated pro-rata expenses may be deductible. The conditions include:

• The expense must be required for the business of the taxpa…