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 Business News | March 2008 
IETU's Tax Structure in Mexico is Complicating Life for Investors
 Mary Thomas - Houston Business Journal
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Since Mexico's "Impuesto Empresarial a Tasa Única," or IETU, law went into effect Jan. 1, questions have swirled for foreign investors.
The new law changes the tax structure for organizations doing business in Mexico. While the law has many implications - both large and small - the most frequently asked question is whether the IETU is creditable for U. S. foreign tax credit purposes.
Under a long-established treaty between the U.S. and Mexican governments, U.S. investors could avoid double taxation by seeking credit on their U.S. federal income tax returns for Mexican income taxes paid on investments in that country. Unfortunately, this treaty narrowly defines which taxes are creditable.
The Internal Revenue Service and the Department of the Treasury are still evaluating the creditability issue, but a notice issued by the IRS plainly states that, until a determination is made, taxpayers who treat taxes paid under IETU as creditable will not be challenged by the IRS. The notice also says if that status changes after the evaluation is complete, the new treatment will not be retroactive. |
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