Emerging Markets Rates and Currencies Handbook

Central Bank. Capital Flow and FDI There are no foreign exchange restrictions in the Mexican market. Foreign exchange transactions can be executed with any local financial institution that maintains a foreign exchange desk. Forward foreign exchange transactions, as well as futures, are allowed. Additional Comments Mexico’s Derivatives Overview The most important derivatives market in Mexico is the over-the-counter (OTC) derivatives market, which is fully integrated with the global derivatives market. Investors and end-users have access to a wide variety of foreign exchange and interest rate contracts, among which the most important ones are FX forwards, FX options, cross-currency swaps, and interest rate swaps. Transactions in the OTC market can be conducted either with a domestic or foreign bank, or directly with an offshore dealer. Exchange-traded derivatives contracts are traded in the Mexican Derivatives Exchange (MexDer), with domestic banks and local subsidiaries of foreign banks accounting for most of the trading activity. The exchange offers listed derivatives contracts including futures contracts on U.S. dollars, the Mexican stock exchange index (IPC), government bonds, interest rates, and individual stocks. MexDer also offers options on the IPC, individual domestic stocks, and exchange traded funds (ETFs) tracking the Nasdaq 100 and S&P 500 indices in the United States. Citibanamex Actuario Roberto Medellin 800 Piso 5 Norte Santa Fe CP 01210 Mexico City, Mexico FX Sales Contact: +5255 2226 6845 Tax Summary – Mexico Mexico W/H Tax • 35% WHT • - Under certain tax treaties typically 10-15% WHT • 40% WHT when lender domiciled in tax haven • 4.9% WHT for banks of tax treaty countries • 10% WHT for banks of non-tax treaty countries • No WHT • Onshore: none • Offshore: “capital derivatives” • - FX none • - Equities • • Offshore “debt derivatives” (treatment similar to debt): • -General • - 4.9% for banks of tax treaty countries • - 10% for banks of non-tax treaty countries • 10% WHT on dividends paid • OTC 25% WHT Deductibility of interests • Interest is deductible, unless D/E > • Fully deductible • Paid dividends are not added to or Country Tax Deductibility and Considerations Inter-Co Debt Offshore Derivatives Equities Local Borrowing Bank Loans Offshore