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Maquiladora manufacturing firms adjust to VAT and IEPS tax changes

Maquiladora manufacturing firms adjust to VAT and IEPS tax changes

So far this year, Mexico’s Tax Administration Service, or, as it known by its Spanish acronym, SAT has received in excess of a thousand applications from maquiladora manufacturing firms that are seeking exemption from payment of Value Added Tax (VAT) and Tax on Production and Services (IEPS) for inputs and raw materials that they import temporarily for use in their production processes. For those companies that do not receive the certification required for the VAT and IEPS tax exemption, the SAT will make a financial guarantee or warranty method of payment available. Details as to how maquiladora manufacturing firms can make application to cover their VAT and IEPS tax obligations in this manner will be forthcoming during the month of July.

According to Mexico’s National Institute of Statistics and Geography (INEGI) there are a total of five thousand and sixty two companies in Mexico that must be certified by the SAT by January 1, 2015 in order to exempt themselves from the VAT and IEPS.

In a recent speech given in Aguascalientes before the National Association of Importers and Exporters this May, Aristotle Nunez, the head of the Mexico’s Tax Administration Service stressed the need to formulate and implement a mechanism that would enable maquiladora manufacturing companies that can neither meet the deadline for VAT and IEPS tax certification, nor produce collateral that will enable them to obtain lines of credit to finance their temporary imports, to avoid the negative cash flow effects of paying the VAT and IEPS at the time of importation. SAT and other government officials are aware that the payment of the taxes on temporary imports means that businesses must either allocate funds from their operating budgets to do so, obtain financing or utilize the financial guarantee or warrantee method for which the SAT will publish information regarding in the coming month.

As of June 24, 2014 one hundred and forty-one maquiladora manufacturing firms have applied for and have received the exemption provided for on the payment of Value Added Tax and Tax on Production Services offered by Mexico’s Tax Administration Service.

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