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Mexico Says Adios to Advanced Pricing Agreements for Maquiladoras

3rd February 2022

It’s official for factories, known as maquiladoras, in Mexico: Advanced pricing agreements (APA) are no longer an option. Thanks to recent tax reform measures, beginning in 2022, maquiladoras will be forced to determine taxable income under safe harbor rules, which compared to APAs, can increase their taxes by 30%. Safe harbor rules mandate that the company’s tax base be determined by calculating 6.9% of the total value of the assets or 6.5% of operating costs—whichever is greater. While APAs can save these factories money, safe harbor rules do come with one advantage: Simplicity. Calculations are straightforward. Safe harbor calculations must be reported with the information return of manufacturing companies by June of the following year. Companies that had relied on APAs for transfer pricing compliance would be wise to see how the loss of them will affect their transfer pricing compliance—and adjust immediately.