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You will learn about the impact of the fiscal reform in Mexico for companies with no legal entity working under the shelter program of American Industries Group. http://www.AmericanIndustriesGroup.com facilitates the successful establishment of global corporations through site selection, start up and soft landing adminitstrative and real estate services throughout Mexico.
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MEXICAN TAX REFORM 2014
Aspects of the Mexican Tax Reform 2014 that will Impact the Shelter Customers without legal presence in Mexico. This reform was approved by the chamber of Deputies and the Senate and is expected to be submitted to
the Executive for its publication in the Official Gazette.
By Patricia Loya
Controller
American Industries Group
Mexico’s Leading Manufacturing Facilitator
www.AmericanIndustriesGroup.com
About American Industries Group
American Industries Group is a
private Mexican company that has
helped over 200 global companies to
successfully establish and run
manufacturing operations
throughout Mexico since 1976
through Site Selection,
Administrative “Shelter” services and
Industrial Real Estate.
Our Locations & Score Card
Reynosa
Monterrey Gómez Palacio & Torreon
Camargo
El Paso
Gómez Farias
Chihuahua
San Luis Potosi
México D.F.
Juárez
Querétaro
Delicias
Silao
Monclova
Guadalajara
Saltillo
Regional Offices, Shelter and/or Real Estate Customers
Shelter and/or Real Estate Customers
Shelter & Start-up Services Real Estate
• 42 Customers. • Over 7,000 Customer’s
headcount • Over 30,000 trouble-free import
and export transactions per year.
• Over 11 M Sq. Ft. Portfolio. • Full Mexican Market Coverage • 9 Industrial Parks • 90 Buildings • 89 Customers
1 .- Value Added Tax (VAT) on the Border Zone.
VAT on the border zone will be at 16% instead of current 11% rate. However, shelter customers with no legal presence in Mexico will not be affected since American Industries recovers this tax, with the exception on non deductible expenses.
Example 2013 Law 2014 New Law Pass through expenses made on the border 100 100
% of VAT 11% 16%
Total $ 11 $ 16
2 .- Value Added Tax (VAT) on temporary imports
Temporary Imports would be taxed with VAT, and that tax will be recovered after the temporarily imported goods are exported. However for those companies that would meet the Certification process by Mexican Authorities (SAT) will award a credit equal to 100% of the temporary import VAT, so this tax will not impact the certified companies. This reform will enter into force one year after SAT posts requirements for the certification of companies.
Note: As long as your company works under the Shelter program, and American Industries obtains the Certification, you will not have to pay VAT for temporary imports (4 year period).
2 .- Value Added Tax (VAT) on temporary imports
Temporary Imports would be taxed with VAT, and that tax will be recovered after the temporarily imported goods are exported. However for those companies that would meet the Certification process by Mexican Authorities (SAT) will award a credit equal to 100% of the temporary import VAT, so this tax will not impact the certified companies. This reform will enter into force one year after SAT posts requirements for the certification of companies.
Example 2013 Law 2014 New Law Temporally import of machinery and equipment 50,000 50,000
Temporally import of raw material 40,000 40,000 90,000 90,000
VAT 0% 16% VAT - 14,400
Credit of 100% to certified companies 0 -14400 Total $ - $ -
3 .- Shelter Maquiladoras
Customers under Shelter Agreement, with residence out of México, will be exempt from being considered permanent establishment for a maximum period of 4 years, after this period the resident abroad must create its corresponding Mexican legal entity in Mexico and pay taxes. This will cause that after 4 years (at the beginning of 2018), our current customers should migrate from total Shelter umbrella to have their own Mexican company and continue working with the American Industries Administrative Services. We consider that for the majority of our clients, once they become a Mexican legal entity, it shall not represent an additional Income Tax cost to them, since the tax they pay in México should be considered to obtain a credit for it in their country of origin. So the difference would be that the tax they currently pay in their country, now they will have to split it in order to pay a part in México and the other part in their country.
Note: American Industries as a member of INDEX ( Maquiladoras Association) is working on the lobbing process with the tax authorities in order to extend the exemption period.
3 .- Shelter Maquiladoras
Customers under Shelter Agreement, with residence out of México, will be exempt from being considered permanent establishment for a maximum period of 4 years, after this period the resident abroad must create its corresponding Mexican legal entity in Mexico and pay taxes. This will cause that after 4 years (at the beginning of 2018), our current customers should migrate from total Shelter umbrella to have their own Mexican company and continue working with the American Industries Administrative Services. We consider that for the majority of our clients, once they become a Mexican legal entity, it shall not represent an additional Income Tax cost to them, since the tax they pay in México should be considered to obtain a credit for it in their country of origin. So the difference would be that the tax they currently pay in their country, now they will have to split it in order to pay a part in México and the other part in their country.
Example 2013 Law 2014 New Law Income tax to Shelter Companies for 4 years 0% 0%
Starting 5 year 0% 30% of fiscal base
4 .- Deduction of only 53% of salary payments exempt from Income Tax to the worker who
receives them.
American Industries would have to charge our customer a 30% of Income Tax out of 47% of exempt salaries which would not be deductible on 2014, however this modification will not affect our customers, since the customer is currently paying 17.5% of IETU Tax on exempt salaries payments, this IETU would disappear on 2014. Our customer would be charged for Income Tax on non-deductible benefits which would be lower than the IETU tax that is currently charged.
Example 2013 Law 2014 New Law
IETU Income Tax
Saving Funds 100 100
Foods coupons 100 100
exempt salaries 200 200
Non deductible 100% 47%
200 94
Rate 17.50% 30%
IETU $ 35 $ 28
5 .- Income Tax for individuals The tax rate applicable with earnings from $500,000 pesos to $749,999 will be subject to a 30% tax rate; those with earnings higher than $749,999 pesos, to a 32% rate; individuals with income over $1 million pesos a year will be subject to a 34% rate, and those with earnings over $3 million pesos, a maximum 35% rate will be applicable.
Example 2013 Law 2014 New Law Salary:
From 500K to 750K pesos 30% 30%
From 750K to 1M pesos 30% 32%
From 1M to 3M pesos 30% 34%
Over 3M 30% 35%
THANK YOU
By Patricia Loya
Controller
American Industries Group
Mexico’s Leading Manufacturing Facilitator
www.AmericanIndustriesGroup.com
Should you have any questions, do not hesitate to contact us.
