Tax deduction in Private Equity Funds

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Dear clients and friends,

In connection with the 2023 annual income tax return to be filed, we would like to draw your attention to the following:

For those managers of private equity funds that operate structures involving foreign vehicles that are treated as “fiscally transparent”, we remind you that some of the Mexican resident investors (“Mexican LPs”) may be entitled to deduct certain expenses and investments made by the vehicle itself (the “Fund”). The latter subject to compliance with applicable tax requirements in Mexico.

A foreign vehicle should be considered "fiscally transparent" if it meets certain conditions that are set forth in Article 4-A of the Mexican Income Tax Law ("MITL"). For instance, a Limited Partnership organized under the law of certain Canadian provinces may qualify as “fiscally transparent” from a Mexican tax standpoint.

Within the expenses that may be deducted by certain Mexican LPs, we can find the management and advisory fees paid by the Fund, subject to certain guidelines.

This tax update is based on articles 4-A and 4-B of the MITL, and rule 3.1.21. of the Miscellaneous Tax Resolution for 2024.

For any questions or comments, please contact: