US COMPANIES WITH OPERATIONS IN MEXICO may want to seek rulings on Mexican asset taxes.
Many countries in Latin America impose minimum taxes on asset value to ensure that some tax is paid even in cases where a company is otherwise reporting tax losses. The asset tax in Mexico is 1.8% of asset value. The value is generally gross value, without subtraction for debts. The Mexican Supreme Court ruled in a case recently involved Hyatt Regency Mexicana that this aspect of the asset tax is unconstitutional. The ruling is not binding precedent for other companies, but is expected to drive other capital intensive companies to seek similar rulings.
The case dealt with debts contracted through the Mexican financial system. It is unclear what the court would have said about ability to deduct debts with entities not residing in Mexico, such as debt owed to a US parent company.