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Mexico transfer pricing: arm's length rule, method order, documentation, the 15 May returns, master file and country by country reports

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Last verified: 2026-10-26 · Status: Stable

Companies that deal with related parties must price those transactions as independent parties would, using the comparable uncontrolled price method first and other OECD style methods only when it is not appropriate; prices outside the interquartile range are adjusted to the median. They must keep a transfer pricing study (unless income is below MXN 13 million, or MXN 3 million for professional services) and file the related party information return and, for larger taxpayers, the local file by 15 May; the master file and country by country report are due by 31 December of the following year. Missing or wrong returns carry fines of up to MXN 321,770, transfer pricing audits can run two years instead of one, and advance pricing agreements can cover up to five years.

USD conversions use MXN 18.5026 per US dollar, the US Federal Reserve H.10 noon buying rate in New York for 16 October 2026 (FRED series DEXMXUS), the latest observation available when this page was verified. Mexican tax law uses the Banxico FIX for foreign currency amounts, which differs slightly. Conversions are for orientation only.

Key facts

Arm's length pricing required for related party transactions (domestic and cross border)	Yes LISR art. 179, as of 2026-10-26 · in force
Business income below which transfer pricing documentation is not required	13000000 MXNLISR art. 76, section IX, as of 2026-10-26 · in force
Related party transactions information return due	15 May of the following year LISR art. 76, section X, as of 2026-10-26 · in force
Local file due	15 May of the following year LISR art. 76-A, as of 2026-10-26 · in force
Master file due	31 December of the following year LISR art. 76-A, as of 2026-10-26 · in force
Country by country report threshold for a Mexican ultimate parent (prior year consolidated revenue)	12000000000 MXNLISR art. 76-A, section III, as of 2026-10-26 · in force
Country by country report due	31 December of the following year LISR art. 76-A, as of 2026-10-26 · in force
Maximum duration of an audit covering transfer pricing	2 yearsCFF art. 46-A, section B, as of 2026-10-26 · in force
Years an advance pricing ruling can cover (requested year, prior year and three following)	5 yearsCFF art. 34-A, as of 2026-10-26 · in force
Federal duty per advance pricing ruling request (2026)	336624 MXNLFD art. 53-G; RMF 2026 Annex 4, as of 2026-10-26 · in force
Maquila safe harbor taxable profit (greater of)	6.9 percent of assets or 6.5 percent of costs LISR art. 182, as of 2026-10-26 · in force

The rule

1. Arm's length rule and who is related. Taxpayers that carry out transactions with related parties, resident in Mexico or abroad, must determine their income and deductions using the prices, amounts or margins that independent parties would have used in comparable transactions; otherwise the SAT may adjust them. Two or more persons are related when one participates directly or indirectly in the management, control or capital of the other, or when a person or group participates directly or indirectly in the management, control or capital of both. The OECD Transfer Pricing Guidelines are used to interpret these rules where consistent with the law.
Cost to do it: No fee; the exposure is a SAT adjustment taxed at 30 percent plus inflation adjustment, surcharges and fines.
Example: A Mexican distributor buys goods from its US parent at prices that leave it a 1 percent operating margin while comparable independent distributors earn 3 to 5 percent. On sales of MXN 200,000,000 the SAT could raise taxable profit by at least MXN 4,000,000 to reach the range, adding MXN 1,200,000 of tax. / Sales of about USD 10,809,292; adjustment of about USD 216,186 and tax of about USD 64,856 at 18.5026.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Art. 179, 2013-12-11 official text · verified 2026-10-26

2. Method hierarchy and the interquartile range. The methods are: comparable uncontrolled price, resale price, cost plus, profit split, residual profit split and transactional net margin. Taxpayers must apply the comparable uncontrolled price method first and may use the others only when it is not appropriate under the OECD guidelines; for resale price, cost plus and transactional net margin, cost and selling price must also be at market. When there are two or more comparables, the result is a range adjusted by the interquartile method in the regulations (or a method agreed in a treaty mutual agreement procedure or authorized by SAT rules); a price outside the adjusted range is deemed to be the median.
Cost to do it: Professional cost of the comparables search and economic analysis, usually from an outside adviser.
Example: A maquila services provider's markup on costs is 4 percent while the interquartile range of comparables is 5 to 9 percent with a median of 7 percent. Being outside the range, its markup is adjusted to 7 percent. On costs of MXN 100,000,000 that adds MXN 3,000,000 of taxable income and MXN 900,000 of tax. / Costs of about USD 5,404,646; extra income of about USD 162,139 and tax of about USD 48,642 at 18.5026.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Art. 180, 2013-12-11 official text · verified 2026-10-26

3. Documentation and the related party information return. Companies with related party transactions must obtain and keep documentation showing arm's length pricing, including the related parties' names, tax residence and ownership links, functions, assets and risks by type of transaction, the amounts per related party and the method applied with comparables; it must be recorded in the accounts. Companies whose business income in the prior year did not exceed MXN 13,000,000, or whose income from professional services did not exceed MXN 3,000,000, are exempt from the documentation duty (except in specific cases such as hydrocarbon contractors). All companies must file the information return on related party transactions for the prior calendar year by 15 May.
Cost to do it: Fixed price study from an adviser each year; no government fee.
Example: A Mexican subsidiary with MXN 60,000,000 of income in 2025 pays management fees to its parent. It needs a 2026 study and must file the related party return for 2026 by 15 May 2027. / Income of about USD 3,242,788; the exemption threshold is about USD 702,604 at 18.5026.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Art. 76, sections IX, X and XII, 2013-12-11 official text · verified 2026-10-26

4. Master file, local file and country by country report. Larger taxpayers (those required or opting to have audited tax reports under CFF art. 32-A, those filing the tax situation report under CFF art. 32-H sections I to IV and VI, which include companies with prior year income of at least MXN 1,103,204,520, listed companies, group regime companies and permanent establishments of foreign companies) that have related party transactions must file: a master file on the multinational group's structure, activities, intangibles, financing and financial and tax position; a local file on their own structure, transactions and comparables; and, if they are a Mexican ultimate parent with consolidated revenue of at least MXN 12,000 million or are designated by a foreign parent, a country by country report. The master file and country by country report are due by 31 December of the following year; the local file by 15 May. The SAT may require a Mexican subsidiary to provide the country by country report within 120 business days when it cannot obtain it through treaty exchange.
Cost to do it: Preparation cost, typically shared with the group's global transfer pricing team.
Example: A Mexican subsidiary of a European group with MXN 2,000,000,000 of income files its 2026 local file by 15 May 2027 and the group master file by 31 December 2027; the country by country report is filed by the European parent unless the SAT requires it from the subsidiary. / Income of about USD 108,092,917; the country by country threshold for a Mexican parent is about USD 648,557,500 at 18.5026.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Art. 76-A, 2013-12-11 official text · verified 2026-10-26

5. Fines for missing or wrong returns. Failing to file the related party information return, or filing it incomplete or with errors, is fined MXN 112,750 to MXN 225,500. Failing to provide the master file, local file or country by country report, or providing them incomplete, with errors or inconsistencies, is fined MXN 226,000 to MXN 321,770. Amounts are as updated and compiled by the SAT (DOF 28 December 2025).
Cost to do it: MXN 112,750 to MXN 321,770 per infraction, on top of any tax adjustment.
Example: A subsidiary misses both the related party return and the local file for 2025. Its exposure is up to MXN 225,500 plus MXN 321,770, MXN 547,270 in total. / Combined fine of up to about USD 29,578 at 18.5026.Código Fiscal de la Federación (CFF), DOF 31 December 1981 (Chamber of Deputies consolidated text, last reform DOF 9 April 2026), Arts. 81, sections XVII and XL, and 82, sections XVII and XXXVII, 1981-12-31 official text · verified 2026-10-26

6. Advance pricing agreements and longer audits. The SAT may issue rulings on the methodology used to price related party transactions (advance pricing agreements), which can derive from an agreement with a treaty partner's competent authority. A ruling can cover the year requested, the prior year and up to the three following years, and longer when it derives from a mutual agreement procedure. Audits that verify transfer pricing obligations may last up to two years instead of the general twelve months.
Cost to do it: A federal duty of MXN 336,624 per ruling request and MXN 67,325 for each review of the annual report on its application (LFD arts. 53-G and 53-H, 2026 amounts in RMF Annex 4), about USD 18,193 and USD 3,639, plus the cost of preparing the request and study.
Example: A Mexican manufacturer requests an APA in 2026; if granted it can cover 2025 through 2029, giving certainty over pricing for five years. / A five year APA protects margins on intercompany flows that can run into millions of US dollars a year.Código Fiscal de la Federación (CFF), DOF 31 December 1981 (Chamber of Deputies consolidated text, last reform DOF 9 April 2026), Arts. 34-A and 46-A, section B, 1981-12-31 official text · verified 2026-10-26

7. Maquila safe harbor. Maquiladoras that determine their taxable profit as the greater of 6.9 percent of the value of the assets used in the maquila operation (including assets owned by the foreign principal) or 6.5 percent of total operating costs and expenses are deemed to comply with the arm's length rules, and the foreign principal is deemed not to have a permanent establishment in Mexico.
Cost to do it: Tax at 30 percent on the deemed profit; simpler than a full study.
Example: A maquila uses assets worth MXN 500,000,000 and has costs of MXN 400,000,000. Its minimum taxable profit is the greater of MXN 34,500,000 (6.9 percent of assets) and MXN 26,000,000 (6.5 percent of costs), so MXN 34,500,000, with tax of MXN 10,350,000. / Assets of about USD 27,023,229; deemed profit of about USD 1,864,603 and tax of about USD 559,381 at 18.5026.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Art. 182, 2013-12-11 official text · verified 2026-10-26

Filing	Who	Due	Fine for failure (2026 amounts)
Transfer pricing documentation	Taxpayers with related party transactions above the MXN 13 million (MXN 3 million for services) income thresholds	Kept on file; checked in audits	Adjustment of the tax
Related party information return	All taxpayers with related party transactions	15 May	MXN 112,750 to MXN 225,500
Local file	Taxpayers under CFF arts. 32-A and 32-H with related party transactions	15 May	MXN 226,000 to MXN 321,770
Master file	Same	31 December of the following year	MXN 226,000 to MXN 321,770
Country by country report	Mexican ultimate parents with MXN 12,000 million revenue, or designated entities	31 December of the following year	MXN 226,000 to MXN 321,770

Mexican transfer pricing filings and penalties, verified 26 October 2026

Worked example

A Mexican subsidiary of a US group distributes the parent's products in Mexico and pays it royalties and service fees; its 2026 sales are MXN 500,000,000 (about USD 27 million).
It commissions a transfer pricing study testing its operating margin with the transactional net margin method, after documenting why the comparable uncontrolled price method is not appropriate, and confirms its margin is within the interquartile range.
By 15 May 2027 it files the related party information return and its local file; by 31 December 2027 it files the group master file. If its margin had fallen below the range, the SAT could adjust it to the median and tax the difference at 30 percent.

Step by step

1. List all related parties and transactions (goods, services, royalties, loans, guarantees) with amounts.
2. Check the documentation thresholds and whether the company is within CFF arts. 32-A or 32-H for the master and local files.
3. Obtain a study before year end, test the comparable uncontrolled price method first and document why other methods are used.
4. Book year end adjustments before closing if results fall outside the interquartile range.
5. File the related party return and local file by 15 May and the master file and country by country report by 31 December.
6. For large recurring flows, consider an advance pricing agreement under CFF art. 34-A.

Common traps

Skipping the comparable uncontrolled price method. The law requires it first; using another method without explaining why invites challenge (LISR art. 180).
Ignoring domestic related party transactions. The arm's length rule also applies between Mexican companies (LISR art. 179).
Late local file. Missing or inconsistent master file, local file or country by country filings cost MXN 226,000 to MXN 321,770 each (CFF art. 82, section XXXVII).
Expecting a one year audit. Transfer pricing reviews may run up to two years (CFF art. 46-A).
Losing the maquila safe harbor. Profit must reach the greater of 6.9 percent of assets or 6.5 percent of costs (LISR art. 182).

Sources

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