Mexico Northern Border Tax Stimulus
WHITE PAPER |
With a focus on boosting economic development, Mexico’s President Lopez Obrador and the Mexican Congress recently enacted a 2019 economic package. Key items within this package that are of importance to U.S. companies doing business in Mexico include:
- Income Tax Credit
- Value-Added Tax (VAT) Credit
The stimulus is available for tax years beginning on or after Jan. 1, 2019, and ending on or before Dec. 31, 2020. No announcements have been made as to a possible extension thus far.
The stimulus is available for taxpayers that are residents of Mexico for tax purposes, and foreigners that have a permanent establishment or an active trade or business in the country. The stimulus is awarded in the form of two dollar-for-dollar credits highlighted above. Certain qualifying taxpayers can opt to apply one or both, and certain taxpayers will only qualify for one or the other. The two credits are explained in further detail in this white paper including what states are covered by the stimulus, guidance on how to register for these credits and other applicable insights.
U.S. companies that have operations or have plans to expand operations into the stimulus region in Mexico must carefully analyze the applicability of the Income Tax and VAT Credits. There is, however, a sense of urgency to perform this analysis, as the due date to register for the Income Tax Credit is March 31, 2019, and the due date to file notice to use the VAT Credit is Feb. 7, 2019.