Jan. 31 deadline for Mexican VAT credit fast approaching

In late December 2018, the Mexican government published two separate tax stimulus for certain zones within the northern states (please see the table below for further reference).

• An income tax credit of one third of the income tax liability of qualifying taxpayers that are residents of the stimulus zone, and
• A VAT credit of 50 percent of the VAT that taxpayers that carry out activities in the stimulus zone pay or collect. This 50 percent reduction can bring attractive cash-flow savings for qualifying taxpayers.

Those taxpayers that wish to apply the VAT credit need to take action, i.e., file a notice with the Mexican taxing authorities, by Jan. 31, 2019.  Affected clients should contact their Mexican tax advisors immediately to assess whether they need to meet this deadline and how to comply.

States covered by the Stimulus

The following table shows the States and Municipalities within those states where the Stimulus can be applied (the “Stimulus Region”):

Before applying the Stimulus, the taxpayer should ensure that its Registered Address is located within the boundary of the above Municipalities (for purposes of the Income Tax Credit) or that the goods and services are delivered and provided within that boundary, for purposes of the Value-Added Tax Credit.