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Maquiladora Tax Certification Required To Avoid VAT Payments Under Mexican Tax Law Reform

Author:Mr Nicolas Guzman
Profession:Drinker Biddle & Reath LLP
 
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Electronic certification applications may be submitted beginning April 15, 2014.

In late 2013, the Mexican legislature passed sweeping tax reforms that financially impact several Mexican industries, including the maquiladora industry. One such reform was the elimination of the exemption on Value Added Tax (VAT) for temporary imports currently enjoyed by maquiladora companies. A VAT of 16 percent was established for all imports, regardless of the location of the manufacturing facility within Mexico. Starting January 1, 2015, companies that import products into Mexico on a temporary basis for manufacture, assembly, repair or otherwise, as part of a maquiladora operation will have to pay 16 percent VAT.

Following discussions with the Maquiladora Industry Association (INDEX), as well as Mexican Tax Authorities (SAT), President Enrique Peña Nieto issued a presidential decree granting maquiladora companies certain tax benefits in order to mitigate some of the effects of the 2013 tax reform. Accordingly, the SAT has issued regulatory guidance on exactly how these benefits will be enacted, including a certification framework that would provide an immediate VAT credit, offsetting the 16 percent VAT levy to be due on all imports. However, only those companies that can demonstrate a requisite level of compliance in tax and trade compliance matters will be eligible to receive this certification by the SAT.

While SAT has issued guidance, and continues issuing clarifications and changes in real time, certain requirements for SAT certification are clear. The SAT certification will be available in three categories, "A," "AA," and "AAA," each providing a higher level of benefits, while at the same time an increased number of requirements.

Certification Requirements

Companies that meet the following requirements will be eligible to obtain SAT certification:

"A" Certification Requirements

Maintain adequate inventory controls to track imported goods and raw materials. Obtain a positive tax compliance opinion issued by the Mexican tax authorities at least 30 days prior to application. Not be listed on the Mexican tax authorities' (SAT) website as a "noncompliant taxpayer." Have valid "digital seals." Demonstrate that all personnel are registered with the Social Security Institute (IMSS) and provide documents showing payment of social security for at least 10 employees. Produce evidence of financial investment in Mexico. Submit the name and...

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