Mexico Enacts Decree For Tax Cuts In Border States

by Mike Godfrey, Tax-News.com, Washington

14 January 2019

Mexican President Andres Manuel Lopez Obrador has signed a decree providing for tax cuts in the Mexican states bordering the United States.

Under the decree, signed on December 29, 2018, and published on December 31, qualifying companies will be able to reduce their effective corporate tax rate from 30 to 20 percent in 43 border municipalities by claiming a tax credit equal to one-third of the corporate tax due.

In order to claim the corporate tax credit, companies must meet certain residency requirements and receive 90 percent of their income from sources within the region. Certain taxpayers are excluded from the incentive, including those deriving income from intangible assets.

In addition, the decree provides for a 50 percent reduction in value-added tax for taxpayers rendering services, selling certain goods and leasing property in the region, effectively reducing the rate of VAT to eight percent, down from 16 percent.

The changes are effective from January 1, 2019.

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