tax update on Mexico

Wednesday 17 February, 2010

The MidAmerica Chapter of the US Mexico Chamber of Commerce hosted the Mexico Tax Update seminar featuring John McLees of Baker & McKenzie.  John focused on:

  • structure of the Mexican tax system-VAT (16%, but different from Europe), income tax (30%) , single tax rate, etc.
  • unique features & pitfalls-17.5% single minimum corporate income rate tax (“IETU”) replaces former asset tax & may be a problem for employee services companies
  • recent developments-4.9% income withholding tax , r&d income tax credits, tax consolidation issues
  • special tax regime for export manufacturing-special tax regimes/treatment to promote maquiladoras (changes in materials & components importation are being put in place because tequila companies took advantage of earlier rules)
  • tax compliance & tax audits-changes in fiscal invoices & increasing scrutiny of economic substance of transactions (a trend in Latin America)
  • tax issues in corporate transactions, such as when acquiring a business in Mexico (plan transaction, acquire assets/stock), disposition of shares in a Mexican company(25% tax on foreign party), establishing new (corporate form & exit strategy) & restructuring (mergers & spinoffs) Mexican operations.

Here are a few important points I pulled out:

  • Mexico has a 3% cash deposits tax (the “IDE”) which applies to deposits of bills & coins @ the bank.
  • Mexico imposes a special tax on production & services (“IEPS”) on cigarettes ($.10/per), 3% on telecom, 26.5% on beer, 30% on gaming/raffles.
  • for awhile anyone who was granted a foreign tax credit in Mexico would be investigated for fraud, but no more
  • Mexico & the US exchange the most tax information in the world.
  • if restructuring, companies can be taxed on the sale of assets, & the Mexican Foreign Investment Commission picks up changes in ownership
  • transfer pricing issues are the biggest tax issue in Mexico & everywhere.
  • Tax assessment penalties can be very expensive, 50-100%.

Along with the other promotional information, the information packet contained the following articles:

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