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Mexico's 2013 Revenue Decree Postpones Corporate Rate Cut

by Mike Godfrey,, Mexico

19 December 2012

While awaiting the formulation of tax reform proposals that have been promised in July next year, the first Federal Revenue Decree issued by President Enrique Peña Nieto’s new Mexican government to cover its operations in 2013, includes, in particular, a delay to the proposed cut in corporate income tax.

The Decree, which was published in the Official Gazette on December 17, and will go into effect on January 1, 2013, follows the lines laid down by Luis Videgaray Caso, the Secretary of Finance and Public Credit, in his remarks to the Mexican House of Representatives.

He pointed out that the President had already announced that there would be a national consultation in 2013 on comprehensive tax reform, which is expected to target a rise the government’s revenue-to-gross domestic product ratio by some 2% or 3% from its relatively low present level, reduce the dependence on oil revenues, and provide funds to develop the country’s social security system.

He confirmed that the Federal Revenue Decree for 2013 would maintain the current tax structure as far as possible, while the results of the up-coming tax reform discussions are awaited.

For example, while the current 30% corporate income tax rate was due to be reduced to 29% on January 1, 2013, this has now been delayed by one year to January 1, 2014, while an exemption from permanent establishment rules for certain non-residents ("maquiladora" companies) in Mexico has also been extended to December 31.

In addition, the withholding tax on interest paid to banks resident in countries with which Mexico has an operational tax treaty remains at 4.9%, and there is no change in the provisions regarding overseas pensions, the flat tax, and the tax incentives regarding, for example, diesel fuel excise taxes. The reduction in the excise tax on beer and alcoholic beverages, which was to have occurred in 2013, is also postponed to the following year.

Finally, the law includes an amnesty program for taxes payable until end-2012. For the past fiscal years up to 2006, the program includes an 80% reduction in a taxpayer’s tax liabilities (including inflation and penalties), and 100% of late interest, if the remainder is paid in one amount to the State Administration of Taxation. For the years between 2007 and 2012 inclusive, there will be a full exemption from penalties and interest if 100% of the tax liability is paid.

TAGS: individuals | compliance | Finance | tax | tax compliance | tax incentives | law | retirement | corporation tax | Mexico | excise duty | ministry of finance | legislation | tax rates | withholding tax | tax reform | penalties

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