Change in Mexico’s Tax to Benefit Insurers
The Premier and Minister of Finance Paula Cox announced today [Feb 6] that arising out of the bilateral Agreement on Exchange of Information with respect to taxes [TIEA] between the United Mexican States and Bermuda a modification has been made to Mexico’s tax law that lowers the withholding tax rate to Bermuda entities, especially to Bermuda captive insurance companies. “This is wonderful news that could not have come at a better time,” Premier Cox said.
A Ministry spokesperson said: “Many Bermudians work directly in the Bermuda captive insurance industry and the news will improve growth in that industry by attracting Mexican entities to establish captive insurance companies in Bermuda.”
“While other jurisdictions that have a TIEA with Mexico will receive the same benefit this will strengthen Bermuda’s international business sector therefore Bermudians not directly employed in the captive insurance company sector will also benefit from our efforts to further strengthen our international business sector. Bermuda is the World’s leading captive insurance center and on a level playing field basis Bermuda is one of the preferred jurisdictions of choice for captives. ”
Ministry of Finance and Public Credit officials in Mexico City have confirmed that modifications have been made to the Miscellaneous Tax Regulations.
Premier Cox said, “We do not provide tax advice and we recommend that you consult with your tax advisors to assess the full range of benefits contained in the modifications, however I can advise that Mexico has made certain modifications to the Miscellaneous Tax Regulations whereby such modifications will avoid the application of the informative tax return obligation and the application of the 40% withholding tax set forth in the Income Tax Law”.
With effect from January 1st, 2011 the following now applies to Bermuda:
- Rule I.3.17.15 of the Miscellaneous Tax Regulations states that when the payments are made to a resident of a country having an Agreement for Exchange of Information on tax matters or a Double Tax Agreement which is considered “broad”, then the 40% withholding tax will not apply. Instead, such income will be subjected to the regular applicable withholding rate set forth in Title V (Non Residents).
- Annex 10 of the Miscellaneous Tax Regulations includes a list of the Agreements which are considered “broad”. The Bermuda/Mexico TIEA is included in such list.
- Rule II.3.10.7 of the Miscellaneous Tax Regulations states that as from the dates set forth below, income of any kind derived from the following territories, may not file the informative tax return referred to in the Income Tax Law.
Bermuda, in its capacity as a Vice Chair of the Steering Group of the OECD Global Forum works closely with Mexico. Additionally the Secretary General, Mr. Angel Gurría of the OECD is a former finance minister of Mexico. Delegates from Mexico are expected to visit Bermuda this May 31st when Bermuda hosts the 2011 OECD Global Forum on Transparency and Exchange of Information for tax Purposes.
