Copyright 1996
InterAm Database
National Law Center for Inter-American Free Trade


April 10, 1992

Completion of U.S.A. - Mexico tax treaty delayed by withholding disagreement

TEXT:
It has been reported that negotiations for the new U.S.A. - Mexico tax treaty 
have stalled over a disagreement about the rate of withholding tax applicable to 
cross-border dividends.  Mexico is said to be insisting on a zero withholding 
rate for both intercompany dividends and portfolio dividends, while the U.S. 
position, based on the U.S. Model Treaty, is 5% for intercompany dividends 
and 15% for portfolio dividends. The U.S.A. is said to be willing to reach a 
compromise on the portfolio rate, but is concerned that Congress would not 
accept a zero rate overall. The Mexican position is that the rates it is offering 
on interest, royalties and dividends must be accepted as a package, since it 
believes that it is making significant revenue concessions with respect to the 
rate on interest. Two other areas of dispute are reported to be whether to make 
the Mexican asset tax expressly creditable under the treaty and whether or not 
to include in the treaty a compulsory arbitration clause.