The energy reform resulting from the December 2013 amendments to the Mexican Constitution that allow the participation of the private sector in the oil and gas market, once again changed the paradigm of the energy industry in Mexico. This is probably the most important reform to the industry since the 1938 expropriation by President Lázaro Cardenas.
Mexico’s tax system was not designed to tax private companies engaged in the exploration and extraction of hydrocarbons. Since the principle that hydrocarbons obtained from Mexican soil are owned by the Mexican state remains in place, there was the need to create a structure requiring companies to make payments from revenue derived from the exploration and extraction of hydrocarbons. In addition, the onerous tax structure that applied to Pemex was in urgent need of replacement with one that affords Pemex, now a State Productive Company, a more flexible taxation applicable to the private sector.
To upgrade the Mexican tax laws and to address the issues previously described, on August 11, 2014, the Hydrocarbons Revenue Law was published. Among other things, this new law sets forth the rules under which the private sector and the State Productive Companies make payments from revenues associated with contracts or assignments, to the Mexican federal government through the newly-formed Mexican Petroleum Fund.