Mergers and acquisitions in Mexico.

The article discusses the tax implications of merger and acquisition transactions in Mexico. Acquiring shares or assets in Mexico has different implications from a tax standpoint. The acquisition of shares may be carried out simply by entering into an agreement with the seller. Additionally, neither value-added tax (VAT) nor income tax would be payable upon the acquisition of the shares. However, a 30% bargain tax is imposed at the non-resident buyer level in case the Mexican tax authorities perform an appraisal in which the value of the shares exceeds more than 10% of the consideration paid. No current deduction is allowed on the payment made for the acquisition of shares. A deduction would be allowed when the purchasing corporation sells the shares. The Federal Tax Code provides that mergers and spin-offs of companies constitute a sale or disposition of property for tax purposes in the event the participating parties fail to comply with the applicable requirements.