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The Mexican Manufacturing, Maquila and Export Services Industry program, known as IMMEX, went into effect on November 1, 2006 with the goal of helping to reduce the tax burden on manufacturing and maquila companies in Mexico by granting duty deferral on foreign goods temporarily imported to the country to be used in the manufacture, transformation, or repair of goods or services destined to be exported or for the provision of export services. In short, the program provides incentives to qualifying investors including the return of import dues paid on products that are subsequently exported, which could mean significant benefits for manufacturing companies in Mexico.
In November of 2019, 51211companies were enrolled in the program nationally.
What Does This Mean for International Companies in Mexico?
In addition to Mexico’s numerous free trade agreements with over 40 countries, as well as other partial agreements and its participation in the WTO, APEC, TPP and ALADI, IMMEX could grant additional important advantages through credits, exemptions, or deferral of VAT, import taxes and tariffs for international companies with operations in Mexico.
The program allows non-resident companies to keep certain imported goods and property in the country from 18 months to indefinitely (or as long as the program is in effect) without triggering tax consequences derived from a permanent establishment.
Companies must request to enroll in the program through the Ministry of Economy and may obtain one or more of the following modes depending on their operations or business model:
– Industrial. For the industrial production or transformation of export goods.
– Services. Applies to services rendered in association with exported goods or services rendered abroad.
– Holding company. Applies to the manufacturing operations of a certified holding company and one or more subsidiaries integrated into the same program.
– Shelter program. Applies to one or more foreign companies that provide technology and productive materials without directly operating under IMMEX.
– Outsourcing. For certified companies that do not have the facilities for manufacturing processes, and instead engage in manufacturing operations through third parties enrolled in IMMEX.
If your business is exploring the option of manufacturing in Mexico, it’s important to evaluate which modality applies to your company. To start up business in Mexico, it’s also important to assess feasibility and weigh the costs and benefits for your specific situation.
What Are the Main Benefits of IMMEX for Manufacturing in Mexico?
– Deferral of import duties, and in some cases they may even be exempted for raw materials through the Promotional Sectorial Program or PROSEC.
– IMMEX companies can apply to obtain VAT credits on temporary imports if the company is granted certified export company status by the tax authority (SAT). This means that VAT payment is only due upon final importation, when applicable.
– Businesses are not considered as having a permanent establishment if all income obtained from productive activities is derived from exports.
– Maquila services are taxed at a 0% VAT rate.
– Transactions between IMMEX companies are taxed at 0% VAT rate under specific conditions.
– Acquisitions of non-resident companies from local suppliers are also subject to 0% VAT in some cases.
Requirements and How to Apply for IMMEX
Companies must provide all legal documentation proving that they are operating legally in the country and are up-to-date on all tax obligations, including its advanced electronic signature, the company’s articles of incorporation, tax ID registration, copy of the identification of the company’s registered agent, and maquila contract or purchase orders. It must also provide a detailed description of its processes or services, including the capacity ratio and percentage of this capacity actually being used, HTS codes of finished goods and raw materials, commercial description of the equipment to be used, the company’s productive sector, and documents proving legal possession of the facilities where operations will be carried out, along with photographs of these (if the facilities are leased, a contract with at least one year remaining on it must also be provided).
This information must then be submitted electronically through the Ministry of Economy’s website, and a notary will prepare an affidavit which verifies the location of the operations and documents filed.
The Ministry of Economy will then notify the company within 10 days from the submission of all documentation if it has been granted access to the program.
Subsequent to this, companies must also meet additional requirements and comply with certain obligations in order to maintain their status, including filing an annual report of operations and filing and paying all taxes on time and notifying both the Ministry of Economy and the tax administration of all changes in operations and ownership of the company, among others.
As you can see, the IMMEX program has a wide range of benefits for all types of manufacturing businesses and operations in Mexico resulting in significant tax savings.
We strongly recommend that you analyze how your company can make the most of IMMEX.
By Alejandro Lara, American Industries Group Board Member
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