In intercompany transactions that involve the transfer of shares, precise valuation is critical—not only to ensure tax compliance but also to accurately reflect the true economic value of the entity involved.
Key Factors in Equity Valuation
In accordance with Article 179 of Mexico’s Income Tax Law and the OECD Transfer Pricing Guidelines 2022, equity valuation should consider key factors such as:
- Updated shareholders’ equity,
- Discounted present value of projected cash flows,
- And, where applicable, the stock market quotation.
A Transfer Pricing Perspective
From a Transfer Pricing perspective, equity valuation ensures that prices agreed upon between related parties are aligned with the arm’s length principle. This calls for a methodology consistent with the entity’s functions, assets, and risks—supported by relevant market comparables and a thorough financial analysis.
Written by: Iván Olivera
