Possible taxpayers deal with treaty override

Abstract

In Mexico, international treaties are hierarchically above domestic law, as long as they do not violate the Mexican constitution provisions. Therefore, the general perspective is that tax treaty override should not be an issue for taxpayers in Mexico. Nevertheless, in connection with the business profits concept there have been some actions recently taken by all branches of the Mexican government that certainly result in infringing on the taxing rights of the counterparties of the Mexican tax treaties: the addition of an exclusion rule regarding all Mexican-source income from the definition of business income for Mexican income tax purposes regarding foreign residents; the assessment of income tax deficiencies concerning items of income that usually fall under the business profits concept; the tax authorities' litigation before the Mexican courts defending its overriding position, and the Mexican court decisions, including the Supreme Court of Justice, validating the overriding.