Inter-American Center of Tax Administrations - CIAT Technical Conference – Oporto, Portugal TAXATION VIS-A-VIS INTERNATIONAL RELATIONS AND THE USE OF NEW TECHNOLOGIES Inter-American Center of Tax Administrations - CIAT Technical Conference – Oporto, Portugal TAXATION VIS-A-VIS INTERNATIONAL RELATIONS AND THE USE OF NEW TECHNOLOGIES Case Study: Topic 2.2 PREVIOUS AGREEMENTS ON TRANSFER PRICING Gabriel Oliver García Central Administrator of International Fiscal Auditing Tax Administration Service – SAT (Mexico) CIAT OPORTO, PORTUGAL, SEPTEMBER 1999

GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATION OF INTERNATIONAL TAX AUDITING

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATION OF INTERNATIONAL TAX AUDITING CIAT OPORTO, PORTUGAL, SEPTEMBER 1999 PREVIOUS AGREEMENTS ON TRANSFER PRICING

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATION OF INTERNATIONAL TAX AUDITING Special resolutions (APA for its English acronym) -article 34-A of the CFF-. 4 Resolution dealing with methodology (CUP, Cost Plus Method, Resale Price Method, Profit-Split Method, Residual Profit Split, TNMM) 4 Resolution in relation to one or more transactions: Purchase-sale of goods ·Rendering of Services ·Royalties (licenses, trademarks, etc.) ·Financial transactions 4 Validity: ·4 subsequent periods ·4 previous periods CIAT OPORTO, PORTUGAL, SEPTEMBER 1999

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATIONOF INTERNATIONAL TAX AUDITING  May be: ·Unilateral ·Bilateral CIAT OPORTO, PORTUGAL, SEPTEMBER 1999 TASTaxpayer ForeignTaxpayer TASForeignAuthority MexicanTaxpayer

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATION OF INTERNATIONAL TAX AUDITING CIAT OPORTO, PORTUGAL, SEPTEMBER 1999 Special resolutions (APA for its English acronym) -article 34-A of the CFF-. 3 Afford legal security to international transactions. 3 Bilateral and multilateral APAs eliminate or substantially reduce legal or economic double taxation. 3 May avoid taxpayers and the tax administrations costly audits requiring long periods of time.

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATION OF INTERNATIONAL TAX AUDITING 4 Period 4 Taxpayer identification data 4 Identification data of related parties in Mexico and abroad 4 Copy of the financial and earnings statements, including a list of costs and expenses of the requesting company 4 Relevant contracts between related parties 4 Operating currency 4 Proposed methodology CIAT OPORTO, PORTUGAL, SEPTEMBER 1999

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATION OF INTERNATIONAL TAX AUDITING 4 Characteristics of goods and services 4 Functional analysis 4 Strategies of market penetration 4 Comparables used CIAT OPORTO, PORTUGAL, SEPTEMBER 1999

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRALADMINISTRATION OF INTERNATIONAL TAX AUDITING 4 Requisites showing the validity of the resolutions 4 Annual report 4 Payment of fees CIAT OPORTO, PORTUGAL, SEPTEMBER 1999

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATION OF INTERNATIONAL TAX AUDITING  At present, a total of 886 requests for APA have been received including:  Bonded assembly plants  Automobile Terminal Industry  Automobile parts  Communications  Distributors and Wholesalers  Electronics  To date, 368 cases have been received. Approximately half of the pending requests are expected to be solved in 1999 and the remainder during the year CIAT OPORTO, PORTUGAL, SEPTEMBER 1999

TAS GENERAL LARGE TAXPAYERS ADMINISTRATION CENTRAL ADMINISTRATION OF INTERNATIONAL TAX AUDITING Process for approving APA requests in force since June 1998: CIAT OPORTO, PORTUGAL, SEPTEMBER 1999 Taxpayer Central Admin. International Tax Auditing Transfer Pricing Committee and Subcommittee Governing Board of TA S Central Admin. International Tax Auditing Central Admin. International Tax Auditing Request Presentation of cases and tech. opinion Approves, disapproves or makes recommenda- tions with respect to request to request If request is approved it is proposed for approval to the Governing Board of TAS Approves request Authorization Issuance of Resolution