Unilateral APA Application by Maquiladoras

Unilateral APA Application by Maquiladoras

The IRS announced in IR-2016-133 that US taxpayers with maquiladora operations in Mexico will not be exposed to double taxation if they enter into a unilateral advance pricing agreement (APA) with SAT through a “Fast Track” program introduced by SAT in October 2016.

Currently, the SAT has over 700 pending unilateral APA applications filed by maquiladoras covering tax years 2014 through 2018. The IRS and SAT entered into an agreement adopting the Fast Track program to timely address the current inventory of pending APA applications.

The new maquiladora framework is an election that SAT would offer to qualifying taxpayers with pending unilateral APA requests with the SAT. The program excludes (1) maquiladoras with annual revenue in excess of 1.2 billion pesos and (2) maquiladoras with a principal company located outside of the United States. The program offers the following options:

  • Qualifying taxpayers may elect to apply the new maquiladora framework in a unilateral APA with the SAT. Because the transfer pricing framework adopted under SAT’s program was discussed and agreed upon with the U.S. competent authority in advance, the transfer pricing results set forth in unilateral APAs executed between SAT and the maquiladora will be regarded as arm’s-length for US tax purpose.
  • Qualifying taxpayers that decline to elect to apply the new maquiladora framework may either:
    • Continue applying for a unilateral APA using traditional approach.
    • Use safe harbors provided in the 1999 agreement; or
    • File a request for a bilateral APA with the US and Mexican competent authorities.

It is expected that qualifying taxpayers with pending unilateral APA with the SAT will receive an election notice shortly (Unofficial source indicates that the SAT will contact the current APA representative or consultant first). The notice will include details on the steps the taxpayer must take regarding its pending unilateral APA request. Qualifying taxpayers should contact their APA representatives for further detail.



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