Proposed VAT rate to increase in 2013

By Adina Moloman

Sources: El Mexicano, Deloitte, PWC

VAT in Mexico is a tax payable on all types of operations at a general rate of 16% in most of the country except the border zones where the VAT rate is 11%.

Food products and medicines are taxed at the zero rates. The condition for the border residents to benefit from a lower VAT rate is that goods or services provided must be used in the border area.

The Mexico Maquiladora customs regime is named IMMEX and allows for the temporary importation of goods into Mexico with no customs duty or import VAT.

This preferential tax is basically because the Maquiladora Industry is considered an important sector that promotes exports, creates jobs and generates local development in the regions in which the multinational companies are located. Basically all the foreign direct investment is using the Maquiladora program in order to establish and manufacture in Mexico.

Maquiladora leader, the president of AIM, Norma Yael Lomelí Pierce, talked about negative economic prospects for 2013 due to the new federal government proposition of raising the general rate of VAT.  She also mentions a possible VAT rise from 11 percent at the border zone to 16 percent as the rest of the country, which might cause important economic damages at the border region.

In 2011, to promote the maquiladora sector, it was established the tax rate of 17.5% of its taxable income, which includes two other taxes known in Mexico as income tax and business flat tax. It also simplified the tax calculation for this sector.  At the end of 2011 Mexico’s president signed a decree to extend the flat tax benefits for 2012 and 2013, but there are discussions over these benefits with the new elect president and its cabinet fiscal propositions.