Mexico: End of APAs and Mandatory Adoption of the ‘safe harbor’ in the Maquiladora Industry

Mexico - 06 / 11 / 2025

In recent years, the maquiladora industry in Mexico has undergone substantial changes in transfer pricing regulation that have transformed its fiscal compliance framework.

With the 2022 tax reform, the possibility of requesting Advance Pricing Agreements (APAs) for the maquiladora industry was eliminated, and the safe harbor was established as the sole mechanism for determining taxable profit.

Accordingly, the term covered by the last APAs requested up to December 31, 2021, expired at the end of 2024 (under the legislation in force in 2021), so that as of 2025 all maquiladoras must determine their profitability by applying fixed returns of 6.9% on assets or 6.5% on costs, and must file an annual information return in June (in accordance with the legislation effective from 2022).

Should the methodology described above (safe harbor) not be complied with, it will be deemed that the non‑resident is carrying out manufacturing activities through a Permanent Establishment (PE) in Mexico.

Elimination of the APA Route and Consolidation of the safe harbor

The decree published on October 26, 2021, and in effect since January 1, 2022, repealed the fifth paragraph of Article 182 of the Mexican Income Tax Law (LISR), which allowed for the submission of new APAs. The sole transitory provision established that only requests submitted up to December 31, 2021, would be processed.

The APAs submitted by maquiladoras covering the 2020–2024 period expired on December 31, 2024. Therefore, starting in 2025, the only mechanism available to determine profits without triggering a permanent establishment (PE) for foreign residents is the safe harbor.

Analysis of Business Restructuring

It is considered relevant to conduct an analysis of the specific maquiladora’s position in order to assess its profitability and exposure to income tax (ISR) under the safe harbor mechanism, given the potential increase in ISR payments this may entail.

Additionally, it will be necessary to analyze the possible protection under a double tax treaty with respect to the concept of a permanent establishment (PE) for those maquiladoras that do not fall within the safe harbor parameters.

Finally, there is the possibility of determining an arm’s length remuneration in accordance with the company’s historical functional profile (a priori, toll manufacturer), or based on a functional profile involving a greater degree of functions, assets, and risks assumed by the company—i.e., conversion to a contract manufacturer.