In compliance with the Income Tax Law, companies and individuals in Mexico (including foreigners with a permanent establishment) must prove that their transactions with related parties were carried out at arm’s length (market prices). This must be done in strict accordance with the OECD Transfer Pricing Guidelines.
Additionally, taxpayers must file an annual informative return regarding these operations
Definition of relates parties
According to Article 90 of the Income Tax Law, two or more persons are considered related parties when;
- There is direct or indirect participation in management, control, or capital.
- In the case of joint ventures, the members and any persons related to such members are considered related parties.
- For individuals, when a relationship exists according to customs legislation
In relation to individuals, the customs law definition of linkage must also be considered. It establishes the following as linked:
I. One person holds a management or responsibility position in the other’s business.
II. They are legally recognized as business associates.
III. They have an employer-employee relationship.
IV. A person directly or indirectly owns, controls, or possesses 5% or more of the shares, equity interest, contributions, or outstanding voting rights in both.
V. One person directly or indirectly controls the other.
VI. Both are directly or indirectly controlled by a third party.
VII. Together, they directly or indirectly control a third party.
VIII. They are family members.
Individuals are considered linked through family if there is a civil relationship; a blood relationship with no limitation in direct line, or collateral relationship within the fourth degree; affinity relationship (by marriage) in a direct or collateral line up to the second degree, as well as between spouses.
Supporting documentation – Related party transactions
Under Articles 76 Section IX and 110 Section XI of the Income Tax Law, taxpayers must obtain and maintain documentation proving that income and deductions with related parties reflect the profit margins used by independent companies. This support, commonly known as a “Transfer Pricing Study,” must follow the methodology and comparability elements of Articles 179 and 180 of the Income Tax Law
- Name, legal name or business name, address, and tax residency of each related party involved in transactions.
- Documentation proving direct or indirect participation between related parties.
- Information regarding the functions or activities performed, assets used, and risks assumed by the taxpayer and the related parties, broken down by transaction type.
- Information and documentation on the related-party transactions and their amounts, categorized by each related party and each type of transaction.
It is important to mention that to demonstrate that transactions comply with market values, or are those that would have been used with independent parties, taxpayers must use data, methodology, and comparability elements based on Articles 179 and 180 of the Income Tax Law; this is commonly known as a “transfer pricing study”.
Taxpayers will not be required to maintain this documentation in the following cases
Taxpayers will not be required to maintain this documentation in the following cases
. Taxpayer type Annual Revenue less than: Restrictions
. No transactions
. Individuals $13,000,000 with preferential
. tax regimes
. Legal Entities / $13,000,000 (business)
. Permanent or $3,000,000 Same restriction
. Establishments (professional services)
*Amounts in Mexican pesos.
*In the case of legal entities, the exemption does not apply to those classified as contractors or assignees under the Hydrocarbons Revenue Law. (Ley de Ingresos Sobre Hidrocarburos).
Information return for related party transactions
In accordance with Article 76, Section X, and Article 110, Section X of the Income Tax Law, taxpayers must file an informative return no later than May 15, detailing income and deduction operations with both domestic and foreign related parties. This informative return shall be filed through Annex 9 of the Multiple Informative Return (DIM).
Pursuant to Rule 3.9.18 of the 2026 Miscellaneous Tax Resolution, it is established that the following taxpayers with related party transactions may be exempt from filing the 2025 related party informative return in the following cases;
- Taxpayers engaged in business activities with revenue not exceeding $13,000,000 MXN in the previous fiscal year.
- Taxpayers earning professional services income not exceeding $3,000,000 MXN in the previous fiscal year.
Exceptions: This exemption does not apply to taxpayers with transactions involving preferential tax regimes, nor to those considered contractors or assignees under the Hydrocarbons Revenue Law.
Consequences and fines
Article 27, Section XVIII of the Income Tax Law establishes that a requirement for the deductibility of related party transactions is that all informative returns, including the related party return, must be filed in a timely and proper manner.
Additionally, the tax authority could also suspend the digital seal certificates, which among other things are important for the issuance of tax receipts.
Economic sanctions through fines range from $112,750 to $225,500 MXN for failing to file the related party return, according with the Federal Tax Code.
As can be observed, beyond the potential imposition of a fine, the most serious consequence could be that the tax authority, upon reviewing related party transactions (whether domestic or foreign), determines that said operations do not meet the deductibility requirements, which could lead to their rejection for tax purposes.
At Núñez Rosas y Asociados, we have the experience and specialists in compliance with informative obligations, as well as expert allies in the preparation of transfer pricing studies.
Nuñez Rosas y Asociados S.C. is a member of Nexia, a leading, global network of independent accounting and consulting firms, providing a comprehensive portfolio of audit, accountancy, tax and advisory services. Nexia works with its member firms leveraging strength across the network and enabling the delivery of global solutions by member firms to their clients. https://nexia.com/disclaimer/
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