Foreign exchange losses can directly impact the amount of deductible interest for tax purposes, as established by the Income Tax Law in Mexico. To deduct interest, it is necessary to meet requirements such as that the loaned capital is used for business purposes, that corresponding taxes are paid, and that interest does not exceed 30% of Adjusted Taxable Income. This last condition poses challenges for companies due to the lack of clarity in some tax provisions.
In the case of companies that are part of multinational groups, currency depreciation can affect the deductibility of interest, primarily due to insufficient capitalization rules. Additionally, companies making interest payments to related parties abroad must consider special tax limitations. A broad interpretation of the concept of instrument may imply that foreign exchange losses arising from business liabilities fall under the limitation of deductible interest.
Currency fluctuations have significant implications for the tax results of organizations, and it is essential to carefully analyze their effect. To determine foreign exchange gains or losses for tax purposes, the official exchange rate published in the Official Journal of the Federation should be considered, which may differ from the corporate rates used in financial statements. These losses are treated similarly to interest for tax purposes.
The variation in the exchange rate can directly affect the financial cost of companies by translating into expenses or benefits from positions in foreign currency. The lack of clear definitions in tax provisions creates uncertainty regarding the treatment of foreign exchange losses. Although the Supreme Court of Justice of the Nation (SCJN) has resolved related cases, clear rules for the consolidated determination of deductible interest have not yet been issued. The high exchange rate volatility of the peso against the dollar in 2024 resulted in a considerable depreciation of the national currency.
