Emerging Markets Rates and Currencies Handbook

105 Citi | Emerging Markets Currencies Handbook 2021 Mexico Requirements to open a foreign currency account Corporate clients are allowed to have local checking or savings accounts in MXN or USD in any region of the country. Foreign investors are allowed to hold cash accounts denominated in Mexican pesos. According to Mexican regulation (Article 65 of the Ley de Instituciones de Crédito and Article 15 of Disposiciones de Caracter General Aplicables a las Instituticiones de Credito — CUB), cash accounts cannot be overdrawn without a credit facility in place. Trade flows There are no restrictions to trading in FX spot or forward markets. Banks need to report all FX trades to the Central Bank. Capital flows/FDI There are no foreign exchange restrictions in the Mexican market. Foreign exchange transactions can be executed with any local financial institution that maintains a foreign exchange desk. Forward foreign exchange transactions, as well as futures, are allowed. Citibanamex Actuario Roberto Medellin 800 Piso 5 Norte Santa Fe CP 01210 Mexico City, Mexico FX Sales Contact: +5255 2226 6845 Item Inter-Co Debt Offshore Bank Loans Offshore Local Borrowing Derivatives Equity W/H Tax 35% WHT • Under certain tax treaties typically 10-15% WHT 40% WHT when lender domiciled in tax haven 4.9% WHT for registered banks of tax treaty countries 10% WHT for registered banks of non-tax treaty countries 30% WHT for non- registered non-tax treaty country banks No WHT Onshore: none Offshore: “capital derivatives” • FX none • Equities: 0 to 40% Offshore “debt derivatives” (treatment similar to debt): • 30% general • 4.9% for registered banks of tax treaty countries • 10% for registered* banks of non-tax treaty countries • 10% to 15% for tax treaty countries • 40% tax haven 10% WHT on dividends 25% WHT on full transaction 30% WHT of capital gain on sale of shares, subject to the interested party giving written proof to the tax authority of the initial cost of shares Deductibility of interests Interest is deductible, unless D/E > 2x Fully deductible N/A Paid dividends are not added to or subtracted from taxable income Deductibility of FX losses Yes for non-MXN debt “FX Derivatives”: MTM losses deductible at end of fiscal year (if different from exercise date) “Other derivatives”: losses deductible on a realized basis N/A Other taxes, duties N/A N/A N/A N/A N/A Comments N/A Strict rules affecting related-party collateralized bank loans N/A Inflation adjustment for deduction of realized losses of debt derivatives N/A Note: Citigroup Inc. and any of its affiliates do not provide accounting, tax, or legal advice. Please seek advice from a relevant licensed advisor. Source: Relevant legislation, publicly available sources. Subsidiary Funding — Tax Consideration Tax Summary — Mexico