Alejandro Torres
Von Wobeser y Sierra, Mexico City
ajtorres@vwys.com.mx

Juan Manuel Moran
Von Wobeser y Sierra, Mexico City
jmoran@vwys.com.mx

Introduction

In recent years, the legal and fiscal landscape in Mexico has undergone significant transformations, not only due to evolving tax legislation and international obligations, but also as a result of constitutional changes that have weakened the independence of the judiciary. These changes have raised concerns among taxpayers and practitioners alike, as court judgments increasingly reflect revenue-driven objectives rather than strict adherence to the law. In this environment, traditional litigation has become less predictable and more costly.

As a result, a renewed focus has been placed on alternative dispute resolution mechanisms that offer taxpayers more efficient, strategic and less contentious means of resolving tax disputes. This article provides an in-depth examination of three key mechanisms available in Mexico: (1) alternative dispute resolution mechanisms (Mecanismos Alternativos de Solución de Controversias or MASC) before the Federal Tax Court; (2) mutual agreement procedures (MAPs) pursuant to tax treaties; and (3) investor–state dispute mechanisms as part of agreements for the promotion and reciprocal protection of investments (APPRIs).

Background: the shifting legal landscape

Traditionally, the arsenal available to Mexican taxpayers facing disputes with the tax authorities included an administrative revocation appeal, followed by an annulment suit before the Federal Administrative Justice Tribunal (El Tribunal Federal de Justicia Administrativa de México or TFJA) and ultimately an amparo proceeding before the federal courts. These remedies enabled the judicial review of tax assessments and enforcement actions.

However, recent constitutional and administrative reforms have cast doubt on the judiciary’s impartiality, prompting many to question the effectiveness of relying exclusively on these traditional remedies. Court judgments have increasingly aligned with the executive branch’s revenue goals, undermining legal certainty and eroding taxpayer confidence.

In parallel, the creation of the Taxpayer Ombudsman (Procuraduría de la Defensa del Contribuyente or PRODECON) introduced the concept of conclusory agreements, which allow taxpayers to resolve disputes during audits without litigation. This tool remains valuable, but PRODECON has faced challenges in maintaining its autonomy and public visibility.

MASC before the Federal Administrative Court

The General Law on Alternative Dispute Resolution Mechanisms (Ley General de Mecanismos Alternativos de Solución de Controversias or LGMASC) and the Regulation of the Public ADR Center of the TFJA provide the legal framework for taxpayers to resolve disputes through mediation, negotiation or conciliation. MASC may be initiated in the following circumstances:

• before litigation, while the matter is still at the administrative stage;
• during the revocation appeal process, provided that no final resolution has been issued;
• after the annulment suit has been admitted, but before the TFJA issues a final judgment; or
• during the execution of final judgments, according to which the implementation poses interpretative or technical challenges.

These procedures are designed to be voluntary, confidential and expeditious, with a maximum duration of six months from admission. The parties must appoint qualified facilitators from an official registry, and the process may lead to binding settlements approved by the Tribunal.

For taxpayers, MASC offers numerous advantages: lower costs, faster resolution, greater control over the outcomes and a non-adversarial forum that fosters collaboration rather than conflict. Moreover, by engaging early with the tax authorities subject to a neutral framework, parties can prevent the escalation of disputes.

It is important to note that the effectiveness of MASC depends on the willingness of the tax authority to participate constructively. Therefore, practitioners should assess the facts and legal posture specific to each case before recommending MASC as a viable alternative.

MAPs in international tax disputes

For multinational enterprises or individuals operating across borders, MAPs are a key tool for avoiding or eliminating double taxation and resolving cross-border disputes. MAPs are governed by the mutual agreement clauses in double taxation treaties (DTTs) signed by Mexico, most of which are based on the Organisation for Economic Co-operation and Development’s (OECD) Model Convention.

MAPs allow the competent authorities of the contracting states to consult and resolve disagreements over the interpretation or application of a treaty. Common use cases include:

• transfer pricing adjustments;
• the attribution of profits to permanent establishments;
• the characterisation of income or payments; and
• conflicting residency claims.

In Mexico, MAPs are implemented pursuant to the Federal Fiscal Code (Código Fiscal de la Federación) and detailed in secondary administrative rules. The procedure is initiated by the taxpayer and typically involves:

• a pre-filing consultation, to determine the viability of the MAP request;
• a formal submission within the time limits established in the applicable treaty (generally two or three years); and
• bilateral negotiations between the competent authorities, which may take several years.

The MAP process does not suspend domestic remedies, but in some treaties, it precludes parallel litigation. In practice, a successful MAP can lead to the withdrawal or modification of tax assessments, retroactive adjustments or coordinated settlements.

MAPs offer a cooperative, non-litigious alternative to court proceedings, with the added benefit of aligning international tax outcomes and reducing the risk of economic double taxation. They are particularly valuable in jurisdictions where judicial independence is uncertain or where courts lack technical expertise on international tax matters.

Investor–state dispute settlement (ISDS) subject to APPRIs

Mexico has signed several APPRIs that provide foreign investors with substantive protections and access to international arbitration against state actions that violate treaty obligations.

Although taxation is often excluded or limited in these treaties, there are exceptions, particularly when the tax measure in question is arbitrary, discriminatory or constitutes an expropriation. Tax-related disputes may be admissible where:

• the tax measure violates fair and equitable treatment standards;
• the investor is subject to discriminatory taxation; or
• the dispute concerns a breach of legitimate expectations or contractual commitments.

Where applicable, investors may initiate proceedings before arbitral bodies such as the International Centre for Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL) or the Permanent Court of Arbitration (PCA), depending on the treaty and arbitration clause. These mechanisms offer neutrality, enforceability and independence from local courts.

ISDS under APPRIs can be particularly effective when tax assessments are perceived as part of a broader pattern of harassment or regulatory overreach targeting foreign investors. However, practitioners must carefully assess the treaty language, jurisdictional thresholds and procedural hurdles before pursuing this route.

Conclusion

In an era of increased fiscal scrutiny, legal uncertainty and political interference in the judiciary, taxpayers operating in Mexico must consider a broader range of dispute resolution strategies. The integration of MASC, MAPs and investor–state arbitration involving APPRIs into traditional tax planning and litigation strategies offer enhanced flexibility, efficiency and legal protection.

Far from being peripheral tools, these mechanisms are now central to a sophisticated and modern approach to tax risk management. They empower taxpayers to engage proactively with the authorities, resolve conflicts constructively and avoid the reputational and financial costs of protracted litigation.

As Mexico continues to adapt to international standards and domestic reforms, legal advisors must remain vigilant and creative in deploying all available remedies to safeguard taxpayer rights and promote a stable and predictable tax environment.