In more detail

On 22 July, the OECD published an update to the transfer pricing profile of several countries, including Mexico, as part of its ongoing effort to reflect the regulatory frameworks of each country. These updates aim to identify and compile the most relevant elements of each regime, and are based on questionnaires answered directly by the tax authorities of each country.

In this update, a new section dedicated to Amount B, also known as the "Simplified Approach", stands out. In the case of Mexico, it is noted that the country intends to incorporate this scheme into its legislation during the second half of 2025. Although the regulatory process is under development, this mention anticipates that the adoption in Mexico of Amount B as part of the transfer pricing regime could materialize in the short term.

Amount B has been proposed by the OECD as part of the Pillar 1 framework, and is focused on determining the arm's length profit attributable to the wholesale distribution operations of multinational companies through a simplified approach. This new approach replaces the selection and application of a transfer pricing method with an already defined pricing scheme with the objective of facilitating compliance and reducing transfer pricing disputes. In line with this objective, some countries such as Ireland and the Netherlands have already adopted the scheme in their legislation, while others are still evaluating its implementation. The United States, for its part, appears to be moving towards adoption.

The adoption of these rules, which could be voluntary or mandatory, will not only have a significant impact on the tax position of companies belonging to multinational groups that carry out wholesale distribution activities, but could also generate double taxation risks. This would occur if the countries in which the group operates adopt Amount B at different times or with divergent criteria.

For example, if Mexico implements Amount B on a mandatory basis, a group that manufactures in the United States and markets in Mexico could face a double taxation situation as long as the United States has not adopted the regime. This is because the profit determined in Mexico under the Amount B scheme might not be considered as an arm's length transaction by the US tax authority, generating inconsistencies in the determination of the profits attributable to the transactions.

Given that Mexico has already expressed its intention to incorporate Amount B in its legislation, transactions between both countries could become one of the first practical cases in which the application of this new approach is tested, which makes it even more relevant to anticipate its implications and prepare adequately.

At Baker McKenzie we are closely monitoring these changes and are ready to support you in assessing impacts, designing strategies and preparing for an eventual implementation of the Amount B. Please do not hesitate to reach out to us to discuss how these changes could affect your operations.