Our partners Juan José Paullada and Alejandro Santoyo, along with associates Diego Guerrero and José Arturo Pérez, explore in this article the strategic role that Bilateral Investment Treaties (BITs) play for foreign investors in Mexico, focusing on their protection against tax-related disputes.

Key Takeaways include: 

  • Protection through BITs: BITs offer essential safeguards for foreign investors, particularly in case of indirect expropriation caused by disproportionate tax assessments. 
  • Indirect Expropriation Risk: Aggressive tax audits and retroactive tax assessments in Mexico may constitute indirect expropriation, allowing investors to invoke BIT protections through investment arbitration proceedings. 
  • Strategic Investment Structuring: To access BIT benefits, including investment arbitration, foreign investors must carefully structure their investments, ensuring they meet jurisdictional and substantive requirements. 
  • Dispute Resolution Mechanisms: BITs provide options for resolving disputes through arbitration, offering an alternative to domestic courts in some instances. 
  • Tax Implications of Restructuring: Investors must evaluate potential tax consequences of restructuring investments and explore available mitigation strategies. 
  • Proactive Monitoring: Given the evolving regulatory landscape in Mexico, staying ahead of potential tax challenges is critical for safeguarding investments.

“By understanding the interplay between tax law and international investment agreements, investors can safeguard their assets and leverage dispute resolution mechanisms, when necessary, particularly in an era of heightened tax scrutiny”. 

We invite you to read the full article to learn more about this topic. 
 
In case you have any questions, please contact our Tax experts (see details below).