KPMG article: “Materiality” limits on deductions for services in Mexico
Tax assessments based on “materiality” often presented and negotiated like transfer pricing adjustments.
Recent Mexican court rulings and administrative regulations introduced new guidance on the need to document “materiality” of services for which Mexican resident companies deduct payments.
Multinational companies need to carefully review service transactions involving Mexican subsidiaries to confirm that all substance and form requirements are met to secure the tax deduction for corporate income tax purposes and prevent potential tax assessments, which are often presented and negotiated like transfer pricing adjustments.
Read a June 2025 article* prepared by KPMG LLP and KPMG Mexico tax professionals that provides background on how the concept of “materiality” has evolved, analyzes the potential impact of new guidance, and explores best practices to strengthen the tax deductibility of service expenses paid by Mexican companies.
* Reproduced with permission from Tax Management International Journal, 6/23/2025. Copyright @ 2025 by Bloomberg Industry Group, Inc. (800-372-1033) http://www.bloombergindustry.com