Article 2 of the Mexican Income Tax Law
For the purposes of this Law, a permanent establishment is considered to be any place of business in which business activities are carried out, partially or totally, or in which independent personal services are rendered. A permanent establishment shall be understood to include, among others, branches, agencies, offices, factories, workshops, facilities, mines, quarries or any place of exploration, extraction or exploitation of natural resources.
Notwithstanding the provisions of the preceding paragraph, when a resident abroad acts in the country through an individual or legal entity, other than an independent agent, it will be considered that the resident abroad has a permanent establishment in the country, in connection with all the activities that such individual or legal entity performs for the resident abroad, even if it does not have a place of business in the country, if such person habitually concludes contracts or habitually performs the principal role that leads to the conclusion of contracts entered into by the resident abroad and these:
- Are entered into in the name or on behalf of himself;
- Provide for the alienation of property rights, or the granting of the temporary use or enjoyment of an asset owned by the resident abroad or over which he/she has the right of temporary use or enjoyment; or
- Obliges the resident abroad to provide a service.
Second paragraph amended by the Decree by which various provisions of the Income Tax Law, the Value Added Tax Law, the Special Tax on Production and Services Law and the Federal Tax Code are amended, added and repealed, published in the Official Gazette of the Federation on December 9, 2019.
For purposes of the preceding paragraph, it will not be considered that there is a permanent establishment in national territory when the activities carried out by such individuals or legal entities are those mentioned in Article 3 of this Law.
Third paragraph added by the Decree by which various provisions of the Income Tax Law, the Value Added Tax Law, the Special Tax on Production and Services Law and the Federal Tax Code are amended, added and repealed, published in the Official Gazette of the Federation on December 9, 2019.
In the event that a resident abroad performs business activities in the country, through a trust, the place where the trustee performs such activities and complies on behalf of the resident abroad with the tax obligations derived from these activities will be considered as the place of business of such resident.
It will be considered that there is a permanent establishment of an insurance company resident abroad, when it receives income from the collection of premiums within the national territory or grants insurance against risks located therein, through a person other than an independent agent, except in the case of reinsurance.
Likewise, a resident abroad will be considered to have a permanent establishment in the country, when it acts in the national territory through an individual or legal entity that is an independent agent, if the latter does not act within the ordinary framework of its activity. For these purposes, it is considered that an independent agent does not act in the ordinary course of its activities, among others, when it is located in any of the following cases:
Paragraph amended by the Decree by which various provisions of the Income Tax Law, the Value Added Tax Law, the Special Tax on Production and Services Law and the Fiscal Code of the Federation are amended, added and repealed, published in the Official Gazette of the Federation on December 9, 2019.
- It has inventories of goods or merchandise, with which it makes deliveries on behalf of the resident abroad.
- Assume risks of the resident abroad.
- Act subject to detailed instructions or to the general control of the resident abroad.
- Exercises activities that economically correspond to the resident abroad and not to his own activities.
- Receives his remuneration independently of the result of his activities.
- Performs transactions with the foreign resident using prices or amounts of consideration different from those that would have been used by unrelated parties in comparable transactions.
It is presumed that an individual or legal entity is not an independent agent when it acts exclusively or almost exclusively on behalf of foreign residents who are its related parties.
Paragraph added by the Decree amending, adding and repealing several provisions of the Income Tax Law, the Value Added Tax Law, the Special Tax on Production and Services Law and the Federal Tax Code, published in the Official Gazette of the Federation on December 9, 2019.
In the case of construction work, demolition, installation, maintenance or assembly services in real estate, or for projection, inspection or supervision activities related to them, it will be considered that there is a permanent establishment only when the same have a duration of more than 183 calendar days, consecutive or not, in a period of twelve months.
For the purposes of the preceding paragraph, when the resident abroad subcontracts with other companies the services related to construction of works, demolition, installations, maintenance or assemblies in real estate, or for projection, inspection or supervision activities related to them, the days used by the subcontractors in the development of these activities will be added, if applicable, for the computation of the aforementioned term.
Income attributable to a permanent establishment in the country will be considered to be income derived from the business activity it carries out or income from fees and, in general, from the rendering of an independent personal service, as well as income derived from the sale of merchandise or real estate in the national territory, carried out by the head office of the person, by another establishment of the same or directly by the resident abroad, as the case may be. Tax must be paid on such income under the terms of Titles II or IV of this Law, as applicable.
Income obtained by the head office of the company or any of its establishments abroad is also considered as income attributable to a permanent establishment in the country, in the proportion in which said permanent establishment has participated in the expenses incurred to obtain such income.