January 2, 2018

On December 19, 2017 the Internal Revenue Service published a preliminary list of 150 countries and jurisdictions that are considered to have a preferential tax regime or zero or low taxation, a rating that is relevant for the application of a series of standards included in the Income Tax Law (LIR).

The payroll was built after a rigorous analysis by specialized teams that have participated in various international instances that analyze the tax issue and will be updated at least once a year to collect changes that may occur based on the behavior of countries.

Its publication aims to provide certainty and facilitate the correct voluntary tax compliance of taxpayers, contemplating additionally the possibility of knowing and receiving the doubts, observations and recommendations of the different stakeholders.

The effect of considering that a territory or jurisdiction has a preferential tax regime is relevant for the practical application of different rules of the LIR, such as Article 14 letter E), No. 1, letter a), which establishes certain reporting obligations for investments abroad; Article 41 F on excess of indebtedness; Article 41 G on controlled foreign entities that obtain passive income; and article 59 regarding a reduced rate of the Additional Tax for royalties and remunerations.

The law prescribes that a territory or jurisdiction has a preferential tax regime, when it verifies the concurrence of at least two of a total of six requirements expressly stated, provided that they are not member countries of the Organization for Economic Cooperation and Development (OECD).

This allows for the maintaining of a dynamic list that adjusts to the behavior of those jurisdictions over time, as it verifies the commitment assumed to comply with international standards in matters of transparency and exchange of information, as well as the clarifications requested by taxpayers for changes in the jurisdictions that are part of the preliminary list, among other elements that must necessarily be taken into consideration.

Finally, taxpayers can consult the service for compliance with the requirements established by the regulation, both with respect to the countries included in the list and those that are not included in the list, providing the necessary information so that the agency can pronounce itself in particular cases.