Investment incentives in Mexico are available in many sectors of the economy.
Mexico possesses a thriving manufacturing-based economy that attracts significant levels of foreign direct investment from all over the world. This is especially true with regard to the US and, to a lesser extent, Europe and Asia. In general, Mexico’s government is very friendly to foreign investment that it perceives as being contributory towards increasing employment, furthering technological development, and increasing the quality and quantity of exports from the country.
Maquiladora Investment Incentives in Mexico
Far and away the most significantly attractive incentive for foreign companies to do business in Mexico is the Maquiladora, or IMMEX, sector that allows for cross-border manufacturing not subject to import/export duties. Among the most attractive benefits afforded foreign manufacturers under this program are the following:
- Duty-free imports for up to 18 months for raw materials and supplies for IMMEX certified companies;
- A zero rate value-added tax on exports, even when physically exported to a third party;
- Value-added tax refunds within a 20 working day period for IMMEX certified manufacturers, rather than the customary 90 working days;
- Import duty refunds for inputs integrated into finished products exported by the manufacturer or sold to another entity for export;
- Streamlined security for supply chains, including shipment security, reduced number of inspections, access to exclusive FAST lanes at the border, reduced shipment times, etc;
- Preferential support from the Foreign Trade Bank for loan guarantees, export policy/program development assistance, financial assistance for direct exporters.
Among the investment incentives in Mexico that available to foreign investors that are not in the manufacturing sector, it is should be noted that:
- Companies located in Mexico pay no local or state income taxes on corporate earnings;
- Taxpayers engaged exclusively in agriculture, livestock, fishing, or timber-based economic activites are provided special tax exemptions based on the number of shareholders that make up the firm’s corporate structure;
- Investment in residential real estate is rewarded with full rights (except bare title to land in coastal and border areas); non-residential real estate has no restrictions, provided the property is purchased through a Mexican entity;
- Companies engaged in research and development for technology are eligible for special financial grants and incentives through the National Council of Science and Technology (CONACyT) under certain conditions;
- Land is often granted for certain industries or available on very favorable terms at certain industrial parks located throughout the country;
- In addition to NAFTA, Mexico offers investors many opportunities for global commerce with free-trade agreements in place with many countries, including Colombia, Costa Rica, Nicaragua, Chile, the European Union, Israel, El Salvador, Guatemala, Honduras, Iceland, Norway, Liechtenstein, Switzerland, Uruguay, and Japan. This feature is among the investment incentives in Mexico that apply to manufacturer and non-manufacturer alike.
There is Room for Improvement
Some of the more customary direct incentives one might expect of a country with a strong focus on expanding foreign investment are, at least for the present, absent. While the aforementioned incentives that are in place outweigh those not to be found to create an overall positive incentive environment. For instance, investment incentives in Mexico typically do not include broad-based and far reaching, federal and state tax incentives aimed to lure Foreign Direct Investment to Mexico. Anecdotally specific considerations have been given, however, in a somewhat limited number of instances in which the industry or activity under consideration had been of particularly high interest to government, either on the federal or state level.