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Mexico Clarifies IMMEX Tax Incentives

by Mike Godfrey, Tax-News.com, Washington

30 December 2010


The Mexican government has published details of revisions to the IMMEX Decree, which provides a tax incentive framework for certain companies exporting goods from Mexico.

The IMMEX scheme (formerly the Maquiladora scheme, which has been grandfathered into the IMMEX system) aims to boost job creation in Mexico's border areas by providing export incentives.

Under the scheme, IMMEX companies are exempted from value-added tax on imports and from 'permanent establishment' rules, meaning that they largely escape income tax. IMMEX companies also benefit from simplified transfer pricing procedures. About 30% of production has to be exported for companies to qualify for these tax breaks.

Modifications to the IMMEX Decree were published in Mexico's official gazette on December 24. The amendments redefine and clarify some of the rules that companies must follow in order to qualify for the above tax incentives.

One change stipulated by the new decree is that at least 30% of the fixed assets used in the manufacturing process must be owned by the foreign investor. The December 24 decree also defines in more detail the types of assets that must be owned by the foreign investor in order to qualify for the tax incentives. The Mexican tax authorities intend to issue guidance to help IMMEX companies apply the 30% rule.

The effective date of the changes is January 1, 2011.

TAGS: tax | value added tax (VAT) | tax incentives | Mexico | manufacturing | transfer pricing | tax breaks

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