Executive Summary:
- The Federal Administrative Court (TFJA) has recently issued a ruling in which it reiterates its position on the taxation of technical assistance services in the international framework.
- This criterion, which is specific to the Treaty between Mexico and the Netherlands, establishes that payments for such services are not categorized as “Business Benefits,” which has significant tax implications for companies involved in these services.
Context and Scope of the Resolution
The TFJA established that technical assistance services do not qualify for the treaty withholding exemption for “Business Benefits.”
Taxpayers will have to face a 25% withholding, according to article 167 of the Income Tax Law.
Legal Basis
The decision is based on Article 3 of the Treaty between Mexico and the Netherlands, which allows the use of domestic law to define ambiguous terms.
According to Article 15-B of the Federal Tax Code (CFF), technical assistance is considered a provision of professional services and not a “Business Benefit” as provided by Article 16 of the CFF, which defines “Business Activities.”
Contrast with the Commentaries of the OECD Model
The TFJA criterion contravenes OECD guidelines, which consider that the provision of professional services (such as technical assistance) is considered a “Business Benefit” if they are not regulated in other articles of the treaty.
Practical Implications
Companies offering or contracting technical support services in Mexico should conduct detailed review and careful planning, especially if they operate under international treaties.
