Mexico's 2014 Tax Reform

Cacheaux Cavazos & Newton, LLP

Mexico recently embarked on several highly anticipated structural reforms. The education reform has been approved by the Mexican Congress, and now the financial, energy, and telecommunications reforms are moving forward as well. All of these reforms seek to modernize important elements of the Mexican government and economy. Such sweeping reforms have been the subject of much debate. In order to implement the proposed reforms, various public policy efforts are moving forward. Broad reforms to Mexico's tax laws - a true tax reform - have been presented and passed, all for the purpose of restructuring the Mexican tax system and broadening the country's tax base.

Mexico's Congress took the lead in the discussion, amendment and approval of major changes to both direct taxes and consumption taxes, which has resulted in significant modifications to the nation's overall tax structure. A new Income Tax Law has been promulgated, while the Single Rate Business Tax (IETU) and the Tax on Cash Deposits (IDE) have been abrogated. The new Income Tax Law is designed to compensate for the fact that Mexican tax authorities will no longer collect the Single Rate Business Tax. In addition, the Federal Tax Code has been amended and supplemented to incorporate new methods which provide more efficient reporting procedures and seek to combat tax evasion. The Value Added Tax (IVA) has also been amended, and broadened, particularly in regard to application of the 16% general rate in all areas of the country, including border communities, and imposition of IVA on temporary importations of goods into Mexico, which under the new law will now be subject to the general rate of 16%. Such 16% IVA payment will apply even though Mexico will implement a certification program or mechanism to allow for credit of IVA that has been assessed on such temporary importations.

Another change pertains to Mexican customs brokers. Until now, most customs clearance transactions have been handled by customs brokers carrying out formal customs clearing transactions. New changes to Mexico's Customs Law cancel such monopoly so that customs transactions may now be handled by non-licensed brokers. New provisions also include a modernization of the electronic means of communication linking Mexican taxpayers and the tax authorities. It is hoped that such new system will facilitate various tax procedures which have, traditionally, proven to be prolonged and difficult.

A review and analysis of the new tax reforms approved by the Mexico's Congress follows, which the authors consider to be a major step forward in the modernization of Mexican tax policy, and Mexico as a whole. Cacheaux, Cavazos & Newton would be pleased to clarify or elaborate on the matters covered in this report, which are of the utmost importance to businesses and operations located in Mexico.

To read the review and analysis click here: Reforma Fiscal 2014: English

Para leer la síntesis de las reformas fiscales presione aquí: Reforma Fiscal 2014: Spanish

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