Mexico foreign investment taxes and incentives are outlined below by the Free Trade Area of the Americas.
MexicoTaxes due on foreign investment are mainly on Profits and Income.
Under the Income Tax Law, all corporations must pay 34% of their net profits (after deductions). Some activities, such as agricultural, livestock, forestry, and fish farming services are exempt from this tax.
Mexico Taxes on interest earned on external loans
4.9% on interest paid to: a) financing institutions from foreign States; b) foreign banks; c) entities that place or invest in the country capital from loan securities, in accordance with the rules issued by the authorities.
10% on interest in the following cases: a) interest paid by credit institutions to residents abroad, other than the interest taxable at 4.9%; b) interest paid to suppliers abroad for transfers of machinery and equipment.
Mexico taxes on royalties
15% on the temporary use or enjoyment of copyright and, in general, for technical assistance or technology transfers.
35% on the temporary use or enjoyment of patents or investor’s or developer’s certificates, trademarks and commercial names, and on advertising.
Mexico taxes on services contracted abroad
If these services are provided in the national territory, they are taxed in relation to the value added at the same rate as services contracted and provided in the national territory.
Mexico taxes on assets
There is also a 2% tax on assets, which is applied only in the event that no profits were made by the company during the fiscal year in question; this tax is obligatory only after the third year of operation.
Mexico value added tax (VAT)
The VAT, currently 15%, is the consumption tax which is actually paid by the final consumer and not by the enterprise, though there are exemptions, such as those on the basic basket of goods and drugs.
Lastly, there are also state or municipal taxes; in 18 states there is a special payroll tax, which varies from a minimum of 0.9% in Baja California to a maximum of 4.6% in Quintana Roo. Another major state tax is the property tax (land use tax), which is based on the determined value of the property.
There are special rules on investment incentive programs:
PITEX: The Program on Temporary Import of Goods Manufactured for Export, which allows tax-free temporary imports.
ALTEX: The Program for Primarily Export Enterprises, under which VAT balances due to these enterprises are immediately refunded.
Drawback: This consists in an export certificate for refunding to exporters any import taxes considered to be indirect.
Maquiladora: This a an Export Development Program under which offshore processing firms import into Mexico, under a temporary and tax-free regime, machinery, equipment, parts, raw materials, and other components used in the assembly or manufacture of semi-finished and finished goods.
There is a list of tax-free imports for the automatic replacement of machinery and equipment, as well as telecommunications instruments and computer equipment. The list also allows temporary tax-free imports of trailers and containers which may remain in the country for three months.
Instead of paying normal import taxes on materials and components, an offshore processing company may import them into Mexico without having to provide specific guarantees, because such imports are exempted upon presentation by the enterprise of the required authorization.
Resources
Free Trade of the Americas (FTAA)
Inter-American Development Bank (IDB) Find comprehensive summary of resources for Mexico law and government from the Library of Congress.Find Mexico economic information and news from the Economist.
Find Law Firms in Mexico.
