Taxation on derivatives.

The article deals with the tax legislation of Mexico on derivatives. The definition of derivative transactions provided by Mexican tax legislation is very broad and can lead to including certain other transactions that are not necessarily financial derivative transactions. To avoid these interpretations, tax authorities issued rules indicating that these transactions are limited to commercial transactions known as forwards, futures, options and swaps and exchange hedges. Mexican Income Tax Law contemplates three types of financial derivative transactions: the first type of transaction is when the underlying value on which the transaction is based corresponds to interest rates or inflation indices, known as financial debt derivative transactions; the second type is when the underlying value is tied to merchandise, currency, stock indexes or baskets or other securities, called financial capital derivative transactions. The third type of financial derivative transaction is when the underlying value is a combination of various underlying values that include capital and debt, that is, cross-currency swaps, considered a mixed derivative transaction, in which case they are treated as financial debt derivative transaction.