Mexico: Tax administration challenging deductibility, VAT credits for advertising and promotional expenses
The tax administration has been challenging the deductibility of advertising and promotional expenses of Mexican taxpayers.
The tax administration (SAT) has been challenging the deductibility of advertising and promotional expenses of Mexican taxpayers, particularly when the brand is not owned by the legal entity incurring them and particularly during tax audits targeting large taxpayers (Grandes Contribuyentes).
The SAT is claiming that there is no valid reason for incurring such expenses when the purpose is to upgrade an asset (brand) that the taxpayer does not own. The SAT’s challenges also affect the taxpayers’ ability to credit value added tax (VAT) on advertising expenses incurred in Mexico.
KPMG observation
Taxpayers are advised to conduct a thorough review of their financial transactions related to advertising and promotional expenses and make certain they have proper documentation and justification from a legal and conceptual perspective to support the business rationale of such expenses, including explaining the strategic value they bring to the taxpayers’ operations.
For more information, contact a KPMG tax professional in Mexico:
Antonio Zuazua | Mexico and LatAm Indirect Tax Leader | +52 811-999-2523| azuazua@kpmg.com.mx
Carlos Perez Gomez | Mexico Transfer Pricing Controversy | +52 55-5246-8448| cperezgomezserrano@kpmg.com.mx