Mexico introduced a legal provision in the 2005 Tax Reform Act (i.e., Art. 32 Para. XXVI, MITL) adopting a thin capitalization regime. The subsequent Presidential Decree (PD) published in the Federal Gazette of 21 October 2005 sets some restrictions to the application of the newly introduced regime.
(a) Background. Under the adopted regime, interest payments made by a Mexican resident company (the debtor) with respect to debts incurred with related entities (the creditor) would not be de…