Question

Find the official text of the U.S.-Mexico income tax convention signed in 1992.

Can you discuss article 7,10,11 and 11 A and any other article you think is of interest to us.

Answer 1

Link have been given for official tax of treaty

https://www.irs.gov › pub › irs-trty › me

Important point of Article 7

The business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on or has carried on business in the other Contracting State through a permanent establishment situated therein

Profit of enterprise may taxed in state where income is attributable to

1)Permenant establishment

2) sales in other state of goods or services

No business profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.

In determining the business profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred,

Important points of article 10

Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

Such dividends may also be taxed in the Contracting State
the tax so charged shall not exceed:

a) 5 percent of the gross amount of the dividend if the beneficial owner is a company which owns at least 10 percent of the voting stock of the company paying the dividends;

b) 10 percent of the gross amount of the dividends in other cases.

A Contracting State may not impose any tax on dividends paid by a company which is not a resident of that State, except insofar as the dividends are paid to a resident of that State or the dividends are attributable to a permanent establishment or a fixed base situated in that State.

Important points of Article 11

Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State

tax so charged shall not exceed:
a) 4.9 percent of the gross amount of interest derived from:
(i) loans granted by banks, including investment banks and savings banks, and insurance companies;
(ii) bonds or securities that are regularly and substantially traded on a recognized securities market;
b) 10 percent of the gross amount of interest if the beneficial owner is not a person described in subparagraph
(a) and the interest is:
(i) paid by banks, including in vestment banks and savings banks;
(ii) paid by the purchaser of machinery and equipment to a beneficial owner that is the seller of the machinery and equipment in connection with a sale on credit

Important points of Article 11A

1)company which is a resident of a Contracting State may be subject in the other Contracting State to a tax in addition to the tax allowable under the other provisions of this Convention.
2. Such additional tax, however, may not exceed: a) 5 percent of the "dividend equivalent amount" of the business profits of the company which are effectively connected (or treated as effectively connected) with the conduct of a trade or business in the other Contracting State and which are either attributable to a permanent establishment in that other State or subject to a tax in that other State under Article 6 (Income from Immovable Property (Real Property)) or Artide 13 (Capital Gains); and b) 10 percent of the excess, if any, of: (i) interest deductible in one or more taxable years in computing the corporation's profits that are either attributable to a permanent establishment in the other Contracting State or subject to tax in that other State under Article 6 (Income from Immovable Property (Real Property)) or Article 13 (Capital Gains), over (ii) the interest paid by or from such permanent establishment or trade or business. In the case of the persons referred to in subparagraph (a)(i) of paragraph 2 of Article 11 (Interest), the tax imposed under this subparagraph shall not be levied at a rate in excess of 4.9 percent, after a period of five years from the date on which Article 11 takes effect.