In January 2022, a decree reforming Mexico’s tax framework got here into impact, which can shut tax loopholes which have, till lately, made international manufacturing in Mexico a profitable and cost-effective manner of doing enterprise. One other purpose of the Mexico tax reform is to crack down on excessive charges of tax avoidance amongst resident corporations and people.
It’s important for international corporations and buyers with operations and/or property within the Latin American nation to pay shut consideration to the tax modifications. Annually since 2020, the administration of President Andrés Manuel López Obrador (AMLO) has carried out substantial modifications to the tax code, and plenty of of Mexico tax reforms are having (or may have) a direct affect on how enterprise is finished there.
Although it doesn’t explicitly say so, corporations in Mexico – each international and home – ought to redouble their accounting necessities in Mexico, because the prospect of being audited by federal tax authorities simply went up.
What impact will Mexico tax reforms have on enterprise?
The principle factor to be cognizant of is that whereas the tax reforms don’t actually raise taxes, enterprise entities and people will find yourself paying extra tax in 2022 and past. The Mexico tax reforms give tax authorities beefed up powers to conduct audits and collect taxes.
The most recent slate of reforms will:
- Deal with many international corporations with operations in Mexico as taxable entities
- Reign within the variety of property and bills which can be thought of tax deductible
- Introduce obligatory disclosure obligations on enterprise entities
- Place limitations on the applicability of lowered withholding tax charges
SEE ALSO: Company Tax Submitting in Mexico: Federal and Native
How will the Mexico tax reforms affect international enterprises?
Maybe the obvious affect the Mexico tax reforms may have on international enterprise is the brand new restrictions positioned on ‘maquiladoras’. A maquiladora is a low-cost manufacturing facility in Mexico that’s owned by a international company. These corporations capitalize on cheap Mexican labor while enjoying tax advantages underneath the USMCA settlement and the IMMEX Program.
Beneath the Mexico tax reforms that got here into impact in 2022, maquiladoras will no longer be permitted to apply for an APA (Advance Pricing Settlement) to adjust to Mexican switch pricing guidelines concerning the charges they cost to their international corporations.
Operators now should adhere to the next tax guidelines:
- Pay 6.5 % of the whole prices and bills incurred by the maquiladora within the manufacturing course of
- Pay 6.9 % of a theoretical internet tax foundation of all of the maquiladora’s property used to carry out the meeting or manufacturing of merchandise, together with property owned by the maquiladora and property owned by the international firm
- International corporations that rent a third-party contractor – a shelter maquiladora –to fabricate or assemble products in Mexico must pay a shelter tax to keep away from making a everlasting institution within the nation
What extra can we anticipate in 2023 from Mexico?
Just like the batch of Mexico tax reforms we noticed in 2022, this 12 months’s bundle doesn’t embrace any important proposed modifications to current taxes. Nevertheless it does give federal authorities extra sturdy powers to levy taxes and even rethink worldwide treaties.
What we will anticipate to see this 12 months:
- Enforcement of the Basic Anti-Avoidance Rule (GAAR). Mexican corporations can declare that sure transactions “lack enterprise goal” and may due to this fact not be taxed. But when an organization is audited, the GAAR can help get to the bottom of such transactions by performing extra subtle audits.
- Obligatory disclosure of cryptocurrency accounts and transactions. International cryptocurrency service suppliers working in Mexico might be pressured to report back to Mexican authorities any transactions and account info with respect to shoppers residing within the nation.
For the fiscal 12 months 2023, revenues are budgeted at MXN 7.1 trillion pesos ($386 billion USD), a rise of 9.9 % greater than the fiscal 12 months 2022. A lot of that enhance is anticipated to come back from the 2 foremost pillars of Mexico’s tax reform: the closing of authorized loopholes usually exploited by international corporations, and the flexibility of authorities to punish tax avoidance and implement tax assortment like by no means earlier than.
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