Limits on Deductibility of Rent for Temporary use of Automobiles

Various interpretations exist as to the maximum amount of deductibility of payments made for the temporary use of automobiles. In thisregard, Article 32 paragraph XIII of the Income Tax Law (Ley del Impuesto sobre la Renta or LISR) provides that “amounts paid for thetemporary use of automobiles are deductible only in amounts not exceeding $165.00 pesos per day per automobile, so long as the requirementsfor deductibility of automobile expenses established in paragraph II of Article 42 of this Law have been met, which shall be strictly applied tothe taxpayer’s activity”. In addition, the Fourth Article of the Decree for Exemption of Tax Payments, Forgiveness of Fiscal Credits andGranting of Fiscal and Administrative Facility Stimulants to Certain Taxpayers published in the Official Journal of the Federation on April 23,2003 increased the amount of the deduction to $250 pesos per day per vehicle. Finally, Article 42 paragraph II of the LISR provides that“investments in automobiles may be deductible only up to the amount of $175,000 pesos”.