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US, Mexico agree to transfer pricing framework for maquiladoras
October, 19th 2016

The US IRS today announced agreement with Mexico on a transfer pricing framework for US multinational enterprises that have maquiladora operations which, if applied in a unilateral advance pricing agreement (APA) with Mexico’s Servicio de Administración Tributaria (SAT), will be accepted by the US as arm’s length.

Maquiladoras are Mexican companies that operate as contract manufacturers of foreign manufacturers, importing material and duty free and tariff free and exporting assembled or manufactured goods.

The new agreement updates and expands a 1999 agreement between the US and Mexico, and seeks assist in the resolution of about 700 pending unilateral APA requests.

The APAs will also provide certainty regarding foreign tax credits and permanent establishments regarding maquiladoras, the IRS said.

The SAT will release details shortly about the election. Further guidance will also be included in a forthcoming IRS practice unit, the IRS said.

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