Mexican Lower House Passes Tax and Customs Reform; Rejects VAT for Maquilas
The Mexican lower house approved on Oct. 17 a modified version of a major tax reform, removing provisions that would have applied new taxes on Maquila border factories, according to several law firms and press reports. Other changes from Mexican President Enrique Pena Nieto’s original proposal include higher top income tax rates and a new tax on high-fat foods, according to a report from Bloomberg (here). The reform also changes Mexican customs procedures. The bill now goes to the Mexican senate, with approval expected by that body by the beginning of November, said Reuters (here).
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According to law firm Jones Day, the Chamber of Deputies effectively eliminated the original proposal to apply a 16 percent value-added tax (VAT) on temporary imports by maquilas (here). That would have created cash flow problem for maquila companies, which would have had to pay the VAT on entry of temporary imports and then apply for a refund once the final goods are sold, said an earlier Jones Day report (here). Although the provision remains in the bill, a 100 percent tax credit will be available to maquilas. The lower house version of the bill also removes a proposal to impose a 16 percent VAT on the sale of maquila-produced goods between foreign residents or between a foreign resident and a maquila. “The 0 percent VAT tax rate for these transactions will remain in effect,” said Jones Day.
The proposed tax reform would also make changes to Mexican customs clearance procedures. The use of customs brokers would no longer be required, and importers and exporters would be able to file directly for customs clearance, said a report from Sandler, Travis & Rosenberg (here). Documents sent electronically to customs would be given legal recognition, and customs clearance would be available through any customs office, the report said. Customs declarations would be able to be corrected both before and after customs authorities decide to examine a shipment, Sandler Travis said. Imports of locomotives, railroad cars, and other railway industry goods would be eligible for temporary importation, and importers would be able to convert temporary imports into regular imports even if the authorized length of time for the temporary import has expired or customs authorities have begun verification, it said.
According to another report from Baker & McKenzie, the reform would also authorize bonded warehouses throughout the country without taking into account their proximity to a port, and goods would be eligible to enter a bonded warehouse under deposit without processing a pedimento (here). An electronic customs system would also be implemented by the law, with importation and exportation of goods processed through the electronic filing of pedimentos. Importers and exporters would have to file another electronic document on the value of the goods in addition to the invoice.