Maquilas Can Begin Applying For Certification For VAT Tax Credit

WASHINGTON — April 21, 2014 — The Mexican tax authority has begun accepting applications from maquiladoras for certification that will ease the burden of a tax reform law that took effect Jan. 1, 2014. Applications may be submitted at various times during the year depending on where in Mexico the maquila is located.

The new law eliminated the value-added tax exemption for temporary imports of goods, parts and components, and machinery and equipment, which had been heavily used by maquilas. The law also increased the VAT in Mexico’s border states from 11% to 16%.

As a result, imported goods are now subject to VAT, and payments will be due in January 2015 unless the importer is accredited through a VAT certification program, in which case the importer will receive a 100% VAT tax credit on the VAT paid on imported goods. Certified companies will also receive refunds of any additional VAT payments within 10-20 days of export, depending on the level of certification obtained.

From April 1 through April 30, the government is accepting applications for certification from companies participating in Mexico’s supply chain security program, the New Certified Companies Scheme, as well as those in the automotive industry. Applications from other maquilas will be accepted based on where they are located geographically: April 15-May 15 for those in the north Pacific area, June 3-July 3 for those in the northeast, July 7-Aug. 7 for those in the north central region, Aug. 7-Sept. 8 for those in the central area, and Sept. 22-Oct. 22 for those in the west and south.

Sandler, Travis & Rosenberg P.A., through the Mexico City office of its affiliated company, Sandler & Travis Trade Advisory Services Inc., offers a number of services to help companies comply with the new maquila requirements. These include internally auditing the maquila’s operations to make sure it is in compliance with the current laws, performing a feasibility analysis to determine the applicability of an advance price agreement with the Mexican government, providing advice on restructuring maquilas that have domestic sales and exports, and assisting in obtaining certification from Mexican tax authorities so that the company can receive the VAT tax credit and expedited tax reimbursement.

Posted April 22, 2014

Source: Sandler, Travis & Rosenberg, P.A.