The industries discussed below enjoy special incentives, regardless of size and with no restrictions as to the foreign ownership of their capital.
Tax Incentives
Publishing Industry
Book publishers enjoy an income tax reduction of 50% of regular tax liability for all entities on income from books published.
Agriculture, fishing, livestock and timber
Taxpayers engaged exclusively in these industries are granted a reduction of 50% of their tax liability. If these taxpayers industrialize their products or are also engaged in commercial or industrial activities, the reduction is limited 25%.
Non-tax Incentives
Tourism Industry
The Government has undertaken to stimulate expansion in the tourist industry in Mexico. Foreigners purchasing residential real estate are now allowed to own all right, except bare title to land in the coastal areas or along the country’s border. No restriction applies in the case of nonresidential real estate in these areas. A government trust, FONATUR, has made substantial investments in the infrastructure necessary for the development of a number resorts.
FONATUR sells beneficial rights to land in its resorts areas for use for hotels, condominiums, shopping centers, to mention a few, on relatively favorable terms and provides expert advice in planning such projects in these and other resort areas.
Industrial Parks
Industrial parks have been established in a number of areas to provide the infrastructure needed by industry. Land is usually available in these areas on relatively favorable terms.
Free Trade Zones
The Mexican foreign investment legislation restrictions are applicable to entire country. Accordingly, no free-trade zones exist to encourage foreign investment, even though duty-free zones do exist. Mexico, the United States and Canada have signed a trilateral free-trade agreement as from 1994.
In addition, Mexico has entered into free-trade agreements with Colombia, Venezuela, Bolivia, Costa Rica, Chile, Nicaragua, Guatemala, Honduras, El Salvador and Israel, European Union and Japan.
Export Incentives
The most significant incentives under the Mexican Economic Development Plan are precisely those provided to stimulate the export of manufactured goods. These export incentives apply to all entities, regardless of size and degree of foreign ownership and are provided in both tax and non-tax forms.
A series of executive decrees, general application rulings and circulars have been issued both to constitute the entities entrusted with the task of prompting export activities and to grant the related incentives to exporters. A summary of the existing exports incentives, as well as the official entities involved, is given below.
IMMEX
The IMMEX Program is a tool that allows temporarily import of goods employed in the transformation, manufacture, repair or service processes. The final product is exported without paying for the General Import Tax (depending to the country that the goods are being exported to), the Value Added Tax or any countervailing duty when applicable. Also, this program is used for carrying out service activities in relation to export goods.
Beneficiaries
The IMMEX Program is granted to organizations with operations in Mexico, as long as such organizations fulfill the requirements included within the IMMEX Decree.
Requirements
The authorization of the program will be conditioned to the following bases:
I. Commitment to either; annually sell abroad goods whose value exceed 500,000 American dollars or their equivalent in other currencies, or to invoice exports for at least 10% of their total sales.
Benefits
The IMMEX Program offers holders the possibility to temporarily import tax-free materials to be incorporated and employed in the productive process of goods to be exported; holders are also entitled to carrying out service activities to goods to be exported established by the Ministry of the Economy acknowledged as issued in the Federation Official Journal.
These goods are listed as follows under four categories:
Raw materials, spare parts and components, packing, packing material and oils and lubricants, labels and brochures employed during the manufacturing process of goods to be exported; (for 18 months)
Containers and truck trailers; (for 2 years)
Tools, equipments and investigation commodities of industrial security and products necessary for cleaning, asepsis and the prevention and control of pollution of the manufacturing plant, manuals and industrial blue prints as well as telecommunication and computing equipment; (until the program expire.)
Machinery, devices and spare parts for the completion of productive processes, laboratory equipment, measuring and testing equipment for their manufactured goods and those required for quality control, for training personnel and equipment for the administrative development of a company; (until the program expire).
Validity
The validity of the Maquila Operational Programs is indefinite and will be subjected to the fulfilling of the provisions of the Program, the Decree and the Customs Office legislation.
Important Note: This is a brief description of the program, for more detailed information, restrictions, regulations and requirements please contact to The Ministry of Economy.
ECEX Program - Foreign Trade Companies
Under the Foreign Trade Companies Program (Programa de Empresas de Comercio Exterior - ECEX), entities exporting more than US $3 million of their production, in addition to being eligible for the benefits of a IMMEX program (see above), are granted the zero-rate treatment for Value Added Tax purposes on local purchases of materials and supplies integrated into the exported production.
Accordingly, local suppliers charge the zero Value Added Tax rate on sales to foreign trade companies as though they were exporting these sales themselves. Foreign trade companies are eligible for a variety of no tax incentives in the form of financial and promotional assistance.
ALTEX Program
The High Volume Exporting Companies Program (Programa de Empresas Altamente Exportadoras - ALTEX) concerns entities exporting at least $2 million US Dollars annually (provided export sales represent at least 40% of gross sales), companies under this program will obtain the following benefits.
Your positive Value Added Taxes balance will be returned in five working days.
Access free of charge to the commercial information system, controlled by The Secretariat of Economy.
Any company interested in operating under this program must show direct exports of a minimum value of US$2 million or its provided export sales representing at least 40% of gross sales, during a year of operations.
In addition, a company under ECEX Program can also operate under ALTEX Program, as long as the registration is still valid by SE.
Import Duty Drawback
Under Import Duty Drawback (Devolucion de Impuestos a los Exportadores), all exporters (including indirect exporters suppliers) are entitled to the refund of import duties paid up to one year before on imported merchandise integrated into exported goods or sold to other entities that physically transport the exported assets. Exporters may also be able to recover import duties through the drawback system when they export products in the same condition in which they were imported.
Important Note: This is a brief description of the program, for more detailed information, restrictions, regulations and requirements please contact to The Ministry of Economy.
PROSEC (Sector Promotion Programs)
The main purpose of the PROSEC programs is to import goods, raw materials, equipment or machinery in the specified industries, with preferential import or duty rates, free of any charge or commission, usually 0%, 3%, 5% or 7% depending on the industry and the item classification.
This program is not exclusively for the Maquiladora industry and it created to mitigate the effects of provisions of the North American Free Trade Agreement, such as the Article 303.
Mainly, the PROSEC programs are tools focused to legal entities or producers of specific merchandise that allows the import of goods with the preferential rate ad-valorem (Import General Tax) diverse finished goods or raw materials to be used in the elaboration of specific products. The final product may be used to export or domestic purpose.
If the company needs a certain good or raw material that is not available in Mexico or if its price is not competitive compared with the international market, the program allows the company to import the merchandise with preferential rate.
In order to benefit from these programs, the Maquiladora Company will be required to fill an application at the Ministry of Economy. Authorizations are granted within 20 working days.
