Mexico should no longer collect withholding taxes on “grossed up” dividends. The Mexican Supreme Court said the practice is unconstitutional. Mexico collects a 5% withholding tax on dividends, but the tax is levied on 1.5835 times the dividend, resulting in an effective withholding tax of 7.69%. Critics charge that the practice violates tax treaties limiting dividend withholding taxes to 5%. The Supreme Court has now declared it unconstitutional. Hacienda, the finance ministry, is analyzing whether it will make refunds to companies that have been withholding taxes at the higher effective rate.