Planning for new and existing operations under the U.S.-Mexico Income Tax Treaty.

Permanent establishment status under the U.S.-Mexico Income Tax Treaty can be avoided by US concerns operating affiliates in Mexico if they plan properly. Permanent establishment findings result in taxation of net income attributable to the establishment when certain activities not considered temporary or auxiliary are performed at a Mexican site. Maquiladoras wishing to avoid permanent establishment status may wish to use arms-length valuation of all transfers between the US parent and the maquiladora. The US parent may also have to sell legal title in the product to the maquiladora if sales in Mexico are planned.