While there is a growing understanding of the sanitary measures needed to restart manufacturing operations in a safe and efficient manner (i.e. social distancing, testing, masks & facemasks, others), the economic consequences of COVID-19 continue to affect the Mexican economy, along with the rest of the world’s economies.
In an effort to address declining tax collections, the Mexican Government has taken a number of actions to increase revenue, including some changes that may be particularly troublesome for Maquiladoras, aka IMMEX companies.
IMMEX companies in Mexico (a category that includes a variety of manufacturing operations, particularly autopart producers) function under a governmental authorization that includes preferential conditions, both operational and fiscal. A more detailed description of the IMMEX program is found in this Foley write up.
The highest degree of preferential treatment is granted to IMMEX companies that are VAT (Value Added Tax)-Certified, which allows these companies to avoid paying the otherwise applicable VAT upon the importation of goods used in their manufacturing operation (either raw materials or machinery and equipment), in addition to other more favorable conditions.
Such preferential settings will automatically be changing as early as each individual IMMEX company renews its VAT Certification. VAT Certifications need to be renewed every 1 to 3 years, generally depending on the number of workers and machinery and equipment investment involved.
The following is a summary of relevant changes recently enacted by the Mexican Government:
Aforementioned benefits are currently considered as routine in VAT Certified IMMEX companies; changes to these provisions may seriously affect their day-to-day operations going forward.
Give these changes, is continuing with a VAT Certified IMMEX company really worth your while? IMMEX companies should conduct a detailed review of their operations and the pros and cons of renewing their VAT Certifications in view of these impending changes.
Companies in all sectors of the economy continue to be impacted by COVID-19. Foley is here to help our clients effectively address the short- and long-term impacts on their business interests, operations, and objectives. Foley provides insights and strategies across multiple industries and disciplines to deliver timely perspectives on the wide range of legal and business challenges that companies face conducting business while dealing with the impact of the coronavirus. Click here to stay up to date and ahead of the curve with our key publications addressing today’s challenges and tomorrow’s opportunities. To receive this content directly in your inbox, click here and submit the form.