New Mexican Tax Will Qualify For Tax Credits

by Mike Godfrey, Tax-News.com, New York

21 December 2007

Concerns that payments under the new Mexican Alternative Minimum Tax (IETU) may not be accepted as foreign tax credits have now been largely allayed. Mexico has announced a long list of countries which have said they will allow these AMT credits under the relevant Double Tax treaties.

The countries include Germany, Ireland, Australia, Italy, Austria, Japan, Canada, New Zealand, the UK, Spain, the Czech Republic, France, Finland, India, South Africa and Switzerland.

The United States government has announced that American taxpayers can credit the IETU against USA income tax, pending any further announcement by the IRS; credits granted in the meantime will not be reversible by the IRS.

Less good news for Mexican companies is that the IETU has to be calculated individually by companies which normally consolidate their tax returns, and compared with their tax normally calculated. This would seem to defeat the purpose of allowing consolidation, to a large extent, especially since it seems that it will not be possible to carry AMT credits forward.

Recommended