Quick answer: The India-Mexico DTAA, signed 10 September 2007 and in force since 1 February 2010, applies a uniform 10% withholding tax rate on dividends, interest, royalties, and fees for technical services — well below India's 20% domestic rate. Interest paid to the Government, Reserve Bank of India, or Banco de Mexico is exempt at 0%. The treaty includes a Limitation of Benefits article and is based on the UN Model Tax Convention.
Key takeaways:
- Dividends, interest, royalties and FTS uniformly capped at 10% under the treaty.
- Government, RBI, or Banco de Mexico interest is exempt at 0%.
- Domestic withholding rate without treaty benefit is 20%.
- Construction/assembly PE arises after six months; a services PE arises after 90 days in any 12-month period.
- Includes a Limitation of Benefits (LoB) article; based on the UN Model (2001).
Overview of the India-Mexico DTAA
The Double Taxation Avoidance Agreement (DTAA) between India and the United Mexican States is a comprehensive bilateral tax treaty that governs cross-border taxation between these two major economies. Signed on 10 September 2007 at New Delhi, the treaty entered into force on 1 February 2010 and is based primarily on the UN Model Tax Convention (2001 version). The agreement provides a modern framework with provisions including a Limitation of Benefits (LoB) article, reflecting post-2000 treaty-drafting best practices.
The primary objective of the India-Mexico DTAA is to eliminate or reduce double taxation on income earned by residents of one country in the other, promote cross-border trade and investment, and provide a predictable tax environment. The treaty covers business profits, dividends, interest, royalties, fees for technical services, capital gains, and independent personal services.
India-Mexico bilateral trade has grown significantly in recent years, with Mexico being one of India's largest trading partners in Latin America. The treaty provides a competitive 10% withholding rate across all major income categories — one of the most favorable rate structures in India's DTAA network. Beacon Filing's tax advisory services can help you navigate the treaty provisions and maximize available benefits.
Treaty History and Current Status
The India-Mexico tax convention was negotiated in the mid-2000s as both countries sought to formalize their growing economic relationship. The treaty was signed on 10 September 2007 at New Delhi. Following ratification, it entered into force on 1 February 2010, with withholding tax provisions becoming effective from that date.
The treaty follows the UN Model Convention (2001 version), which is typical for agreements between developing nations as it preserves broader source-country taxation rights compared to the OECD Model. A key distinguishing feature is the inclusion of a Limitation of Benefits (LoB) article, which was relatively progressive for a treaty signed in 2007 — predating the BEPS project's widespread adoption of anti-abuse measures.
Both India and Mexico have signed and ratified the OECD Multilateral Instrument (MLI). India deposited its instrument of ratification on 25 June 2019 (effective 1 October 2019), and Mexico deposited its instrument on 15 March 2023 (effective 1 July 2023). The MLI introduces additional anti-abuse provisions, including the Principal Purpose Test (PPT), which now supplements the treaty's existing LoB clause. This gives the India-Mexico DTAA one of the strongest anti-avoidance frameworks in India's treaty network.
Key Treaty Articles
The India-Mexico DTAA contains articles covering the full range of cross-border income categories. Below are the most relevant provisions for businesses and investors:
Article 5 — Permanent Establishment
Article 5 defines when a Mexican enterprise creates a permanent establishment (PE) in India, triggering Indian taxation on its business profits. The definition follows the UN Model closely and includes a fixed place of business such as a place of management, branch, office, factory, workshop, warehouse, mine, oil or gas well, quarry, or similar extraction site. Construction and assembly projects constitute a PE if they last more than six months. The furnishing of services through employees creates a PE when activities continue for more than 90 days within any 12-month period.
Article 7 — Business Profits
Business profits of a Mexican enterprise are taxable in India only if the enterprise carries on business through a PE situated in India. Profits attributable to the PE are determined on the basis of the PE's activities and are computed as if the PE were a distinct and separate enterprise.
Article 10 — Dividends
Dividends paid by an Indian company to a Mexican resident are subject to withholding at the source at a maximum rate of 10%. India's domestic withholding rate for non-residents is 20%, so the treaty provides a substantial 10 percentage point reduction. The flat 10% rate applies to all dividend recipients who are beneficial owners, without distinction based on shareholding percentage.
Article 11 — Interest
Interest income is taxable at source at a maximum rate of 10% for general interest payments. Interest paid between governments, political subdivisions, central banks (Reserve Bank of India and Banco de Mexico), or on government-approved loans is exempt from taxation. This represents significant savings against India's domestic rate of 20% under Section 195.
Article 12 — Royalties and Fees for Technical Services
This article covers both royalties and fees for technical services at a uniform rate of 10%. Royalties include payments for the use of copyrights, patents, trademarks, designs, models, plans, secret formulas, processes, and industrial/commercial/scientific equipment. Fees for technical services cover payments for services of a managerial, technical, or consultancy nature. The broad FTS definition — covering all managerial, technical, and consultancy services without a restrictive "make available" clause — means most cross-border service payments from India to Mexico attract the 10% treaty rate.
Article 13 — Capital Gains
Gains from the alienation of immovable property situated in India are taxable in India. Gains from the alienation of shares in a company whose assets consist principally of immovable property in India may also be taxed in India. Gains from the alienation of movable property forming part of a PE's business property are taxable in the PE's state. Capital gains from the sale of shares in Indian companies by Mexican residents are generally taxable in the state where the company is a resident (India), per the UN Model approach.
Withholding Tax Rates Summary
The following table compares the treaty rates with India's domestic withholding tax rates for payments to Mexican residents:
| Income Type | DTAA Rate | Domestic Rate | Effective Rate | Treaty Article |
|---|---|---|---|---|
| Dividends | 10% | 20% | 10% | Article 10(2) |
| Interest (general) | 10% | 20% | 10% | Article 11(2) |
| Interest (Government/central banks) | 0% | 20% | 0% | Article 11(3) |
| Royalties | 10% | 20% | 10% | Article 12(2) |
| Fees for technical services | 10% | 20% | 10% | Article 12(2) |
Note: Under Section 90(2) of the Income Tax Act, taxpayers can apply whichever rate — the DTAA rate or the domestic rate — is more beneficial. In the India-Mexico treaty, the treaty rate of 10% is consistently lower than the domestic rate of 20%, making the treaty beneficial across all categories. For a detailed rate-by-rate breakdown, see our dedicated withholding tax rates page for India to Mexico.
Permanent Establishment Rules
The PE provisions in the India-Mexico DTAA follow the UN Model Convention approach. Article 5 establishes several categories of PE:
Fixed Place PE: A place of management, branch, office, factory, workshop, warehouse, mine, oil or gas well, quarry, or any other place of extraction of natural resources constitutes a PE.
Construction PE: A building site, construction, assembly, or installation project constitutes a PE if it lasts for more than six months. This 6-month threshold follows the UN Model and is shorter than the OECD Model's typical 12-month threshold, providing India with broader taxation rights over Mexican construction projects in India.
Services PE: The furnishing of services, including consultancy services, by a Mexican enterprise through employees or other personnel in India creates a PE where such activities continue for a period aggregating more than 90 days within any 12-month period.
Agency PE: A person acting on behalf of a Mexican enterprise who habitually exercises authority to conclude contracts creates a PE. Independent agents acting in the ordinary course of their business do not constitute a PE.
Mexican companies should carefully monitor the duration and nature of their activities in India to avoid triggering an unintended PE. Beacon Filing's India entry strategy services include PE risk assessments.
Tax Residency and Certificate Requirements
To claim treaty benefits, a person must be a tax resident of one of the contracting states. Under Article 4, residence is determined by each country's domestic law — in India, the 182-day presence test under the Income Tax Act, and in Mexico, registration with the Servicio de Administracion Tributaria (SAT).
For individuals who are resident in both states, the tie-breaker rule applies sequentially: permanent home, center of vital interests, habitual abode, and nationality. If the tie cannot be broken, the competent authorities resolve the matter by mutual agreement.
To claim reduced treaty rates in India, a Mexican resident must provide a Tax Residency Certificate (TRC) issued by SAT. The payee must also furnish Form 10F and a self-declaration of beneficial ownership. Indian payers must comply with Form 15CA/15CB requirements.
Limitation of Benefits
A distinctive feature of the India-Mexico DTAA is its Limitation of Benefits (LoB) article, which predates the BEPS project. The LoB clause provides that only "qualified persons" are entitled to treaty benefits. A person will not be entitled to treaty benefits if their affairs were arranged with the primary purpose of obtaining benefits that would not otherwise be available.
With both countries having ratified the MLI, the Principal Purpose Test (PPT) now supplements the existing LoB clause, creating a dual anti-abuse framework. This means Mexican entities seeking treaty benefits on Indian-source income must demonstrate:
- Genuine economic substance in Mexico
- A bona fide business purpose beyond obtaining treaty benefits
- Status as a "qualified person" under the LoB article
This robust anti-avoidance framework makes the India-Mexico treaty less susceptible to treaty shopping compared to treaties without such provisions.
How to Claim Treaty Benefits
Step 1: Obtain a Tax Residency Certificate (TRC)
The Mexican resident must obtain a TRC from SAT certifying their Mexican tax residency for the relevant fiscal year.
Step 2: Provide Form 10F
The non-resident must furnish Form 10F to the Indian payer with prescribed information including name, status, nationality, RFC (Registro Federal de Contribuyentes) tax identification number, and period of residential status.
Step 3: Self-Declaration
A self-declaration confirming beneficial ownership and that the recipient does not have a PE in India (if claiming income is not attributable to a PE).
Step 4: Indian Payer Compliance under Section 195
The Indian payer must deduct tax at the treaty rate of 10% and file Form 15CA electronically before making the remittance. For payments exceeding INR 5 lakh, Form 15CB from a Chartered Accountant is required.
Step 5: Claim Relief under Section 90
Indian residents earning income in Mexico can claim double taxation relief under Section 90 of the Income Tax Act by way of a foreign tax credit for Mexican taxes paid.
Beacon Filing's FEMA and RBI compliance services ensure all documentation is properly prepared for claiming treaty benefits.
Frequently Asked Questions
What is the India-Mexico DTAA and when was it signed?
The India-Mexico DTAA is a bilateral tax treaty signed on 10 September 2007 at New Delhi between India and the United Mexican States. It entered into force on 1 February 2010. The treaty follows the UN Model Convention and provides a uniform 10% withholding rate across dividends, interest, royalties, and fees for technical services.
Does the MLI apply to the India-Mexico DTAA?
Yes. Both India and Mexico have ratified the MLI. India's MLI entered into force on 1 October 2019, and Mexico's on 1 July 2023. The MLI introduces the Principal Purpose Test (PPT), which supplements the treaty's existing Limitation of Benefits clause.
What makes the India-Mexico DTAA different from other Indian treaties?
The India-Mexico DTAA stands out for its uniform 10% rate across all major income categories, its LoB clause predating BEPS, and the dual anti-abuse framework created by the LoB plus MLI's PPT. It is one of the most straightforward and favorable treaties in India's DTAA network.
How does a Mexican company avoid creating a permanent establishment in India?
A Mexican company can avoid PE exposure by ensuring construction or assembly activities do not exceed six months, and service activities do not exceed 90 days in aggregate within any 12-month period. It should avoid maintaining a fixed place of business and not have dependent agents who habitually conclude contracts in India.
Are fees for technical services taxable under the India-Mexico DTAA?
Yes. Article 12 covers fees for services of a managerial, technical, or consultancy nature at a rate of 10%. Unlike the India-USA treaty, there is no "make available" requirement — all such service payments are covered regardless of whether technical knowledge is transferred.
What documentation is required to claim DTAA benefits in India?
The Mexican resident must provide a Tax Residency Certificate from SAT, Form 10F, and a self-declaration of beneficial ownership and non-PE status. The Indian payer must file Form 15CA and Form 15CB for payments exceeding INR 5 lakh before making the remittance.
How are capital gains from Indian shares taxed for Mexican residents?
Under the UN Model approach adopted in this treaty, capital gains from the sale of shares in Indian companies by Mexican residents may be taxed in India at domestic rates. The Mexican resident can claim a foreign tax credit in Mexico for taxes paid in India.
This article is for general information only and is not legal, tax, or investment advice. Confirm current rules with the relevant authority or a qualified professional — or ask our team. See our full disclaimer.
Doing business between India and Mexico? Our team handles the treaty filings.
Tax Advisory for Foreign Investors in IndiaMexico — Dividend Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General Beneficial owner is a resident of the other contracting state; applies to income from shares or other profit-participating rights | 10% | 20% | Article 10(2) |
Mexico — Interest Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General Standard rate for all interest payments where the beneficial owner is a resident of the other contracting state | 10% | 20% | Article 11(2) |
| Government and central banks Interest paid to the Government, political subdivisions, Reserve Bank of India, or Banco de Mexico, or on Government-approved loans | 0% | 20% | Article 11(3) |
Mexico — Royalty Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| General royalties Payments for use of or right to use copyrights, patents, trademarks, designs, models, plans, secret formulas, processes, or industrial/commercial/scientific equipment | 10% | 20% | Article 12(2) |
Mexico — FTS Rates
DTAA Rate vs Domestic Rate
| Income Category | DTAA Rate | Domestic Rate | Article |
|---|---|---|---|
| Fees for technical services Payments for services of a managerial, technical, or consultancy nature; beneficial owner must be resident of other contracting state | 10% | 20% | Article 12(2) |