On 8 October 2021, officials from Germany and Mexico signed an amending protocol to the 2008 income and capital tax treaty between the two countries. The protocol is the first to amend the treaty and includes the following changes:

• The preamble is replaced in line with OECD BEPS standards;
• Article 5 (Permanent Establishment) is updated in relation to activities of a preparatory or auxiliary character that do not result in a PE;
• Article 10 (Dividends) is amended to introduce a minimum holding period with respect to the 5% withholding tax rate, providing that in order to enjoy the reduced 5% rate, the beneficial owner must have directly held at least 10% of the paying company's capital throughout a 365-day period that includes the day of payment;
• Article 13 (Capital Gains) is amended in relation to gains from the alienation of share deriving value from immovable property situated in a Contracting State, providing that such gains may be taxed in that State if the shares derived more than 50% of their value from immovable property situated in that State at any time in the 365 days preceding the alienation;
• Article 25 (Mutual Agreement Procedure) is amended to provide that any agreement reached under MAP shall be implemented notwithstanding any time limits in the domestic law of the Contracting States, which replaces a current time limit of 10 years;
• Article 28 (Application of the Agreement in Special Cases) is replaced with expanded limitation on benefits provisions, including:
  • the provision that the benefits of the treaty will be denied where an enterprise of a Contracting State derives income from the other State and:
    • the first-mentioned State treats the income as attributable to a permanent establishment of that resident in a third jurisdiction;
    • the profits attributable to the permanent establishment are exempt from tax in the first-mentioned State; and
    • the tax paid on the income in the third jurisdiction is less than 60% of the tax that would have been paid in the first-mentioned State had the income not been attributable to the permanent establishment;
    • with an exclusion from the limitation if the income derived from the other State emanates from, or is incidental to, the active conduct of a business carried on through the permanent establishment (other than the business of making, managing or simply holding investments for the enterprise's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance enterprise or registered securities dealer, respectively);
  • the general provision that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit would be in accordance with the object and purpose of the relevant provisions of the treaty.

The protocol will enter into force 30 days after the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.