One of the organizations with a keen interest in the Mexican Tax Reform of 2014, and the outcomes that it results generates, is Consejo Nacional de la Industria Maquiladora y Manufacturera de Exportación (INDEX).  INDEX is the body that represents Mexico’s maquiladora industry interests nationwide.

Luis Aguirre Lang, president of INDEX recently relayed information in a memo to that group’s Council Board on the result of legislative process related to the Mexican Tax Reform of 2014 that was concluded on October 31, 2013. He communicated that minutes of discussions by the legislature on the subject of the Mexican Tax Reform of 2014 have been approved by the nation’s Senate and the governments lower House of Representatives. The minutes will be shortly published in Mexico’s Official Gazette, and details of the law have been incorporated into the country’s Revenue Law and Federal Budget.

Aguirre Lang further communicated to the leadership of INDEX that, although the legislative process has run its course, the organization, in general, and its Tax Committee, in particular, will continue to work to influence Mexican officials at the Secretary of Finance and Public Credit (SHCP) to mitigate the impact of specific item that will have the most effect on the tax competitiveness of the maquiladora industry.

The goal of discussions and negotiation with Mexican taxation officials will be to achieve clarification in this critical area through the crafting and implementation of temporary regularitons, or through special considerations carved out for the maquiladora manufacturing sector of the economy.

In the bulletin disseminated by Aguirre Lang, the president of INDEX sought to inform about (1) the issues that were resolved by INDEX during the legislative process with respect to the original tax reform proposal submitted by the President on September 8, (2) the issues that will be resolved through administrative rules and finally (3) the issues that will be dealt with though granting of a presidential decree granted to the maquiladora industry.


1. VAT on Temporary Importations – VAT on temporary importations will be due at the time of the temporary importation, but article 28-A was incorporated into the VAT Law including a tax credit applicable against 100% of the VAT liability arising from the importation made by companies that become certified by the Mexican tax authorities (“SAT”). This new provision will become effective one year after the publication by the SAT of the certification rules. Through this date, these rules have not been published because INDEX is still actively participating in the meetings aimed at developing the rules that govern this provision. Index will provide further updates on this issue as is soon as available.

Undoubtedly this is one of the most significant achievements from the lobbying efforts before the Mexican Congress in light of the significant financial costs that will be avoided as a result of the cash flow that maquiladoras would have had to have available to pay the VAT on temporary importations, as well as to recover such VAT at a later date (estimated in US$12,500 million).

2. VAT on sales between non-residents – Sales between non-residents of goods that are transferred in Mexico between Maquiladora companies will continue to be exempted from VAT in accordance with article 9-IX of the VAT Law provided that the goods remain under the temporary importation regime. In the original reform proposal, these transactions would have been subject to VAT, which would trigger a non- recoverable VAT for the non-resident that purchased the products.

3. Definition of Maquila Operation for Income Tax Purposes – The issues that were resolved regarding the definition of maquiladora operation for income tax purposes, are the following:

a. It was clarified that the exportation of goods abroad can also executed using virtual operations, in order to avoid the need for physical exports on goods that are part of a supply chain structure in Mexico;
b. Design and product development activities will continue to be considered as transformation activities for purposes of qualifying as maquiladora operations;
c. It was clarified that the transformation and repair operations can be complemented with the use of machinery and equipment (M&E) owned by the maquiladora company or a third party non-resident that has a contractual relationship with the Principal as well as with M&E leased from a non-related party.
d. With respect to Shelter companies, the term under which the foreign resident contracting with the Shelter company would not constitute a permanent establishment (PE) in Mexico was extended to 4 years (from 3 included in the original proposal).


1. Definition of “Productive Activity” – A clarification will be issued about the scope of section II of article 181 of the income tax law with respect to productive activity. This section provides that maquiladora operations are those in which the entirety of the revenue from the productive activity arises exclusively from such operations. This clarification will define that revenues such as the ones listed below will not be considered as arising from a productive activity, and, therefore, export maquiladoras should not have an issue in qualifying as maquiladora operations for tax purposes. This clarification has already been confirmed verbally by the tax authorities.

Revenues that will not be considered revenue resulting from productive activities for the purposes of the Mexican Tax Reform of 2014 include the following:

a. Revenues from the sale of fixed assets (movable or real estate).
b. Revenues from sales of scrap, waste or obsolete materials.
c. Revenues from transactions between related parties. Including, among others, interest, administrative services, leasing and subleasing, sales of spare parts, etc.
d. Insurance claims.
e. Currency fluctuations.

As we receive more information concerning unresolved issues that are pertinent to the Mexican Tax Reform of 2014, we will post it to this blog.