Taxes on Mexico's Maquiladoras Set to Rise, But Government May Relent Alistair M. Nevius - CGMA Magazine
go to original December 17, 2013

Changes in Mexican tax law that will affect almost every maquiladora operation are scheduled to take effect January 1st, but lobbying by the industry appears to have convinced the government to ameliorate some of the new law’s effects.

Mexico officially published new tax rules on December 11th, and the new rules include numerous changes affecting taxation of maquiladoras.

Maquiladoras, mostly located along Mexico’s border with the United States, manufacture goods for export, and, according to the Mexican government, they account for 85% of Mexico’s manufacturing exports. Until now, they have received large tax breaks, including the ability to import materials without paying duty or value-added tax (VAT), provided the finished product produced by the maquiladora is exported to a foreign parent company that sells the product and realises profit outside of Mexico. Maquiladoras have also benefited from a partial income tax exemption, a business flat tax credit, exemption from permanent establishment status for the foreign parent company, and a special transfer-pricing safe harbour.

The new tax law eliminates the business flat tax, which was enacted in 2008, and the credit against the tax that maquiladoras could claim. It also eliminates the maquiladoras’ partial income tax exemption.

Read the rest at CGMA Magazine

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