New guidelines for the taxation of maquiladora operations

On 30 October 1999, the Mexican and US tax authorities jointly announced new rules for participants in the maquiladora program which are expected to be in force between 1 January 2000 and 31 December 2002. Under these rules, maquiladora operations do not constitute a permanent establishment of a US company in Mexico and are considered to comply with transfer pricing rules if they elect under the new safe harbor test or negotiate a modified APA. Comments based on the press release of the Ministry of Finance and the rules published in the Miscellaneous Resolution of 28 December 1999.