MAPI Report addresses Mexico's new tax law.
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Press Release Summary:
According to Manufacturers Alliance/MAPI report, Mexico's tax law will impact U.S. manufacturers located in that country. Law imposes single rate business tax, which permits Mexican states to impose flat tax on goods and services previously only subject to federal tax. Law, which took effect January 1, 2008 and which is expected to remedy Mexico's budget deficit, is the most drastic change for foreign companies' tax and accounting positions in Mexico over past 20 years.
Original Press Release:
MAPI Report Addresses Mexico's New Tax Law
Mexico's recently enacted 2008 Tax Law will have a sweeping effect on U.S. maquilladoras, manufacturing facilities, located in that country. A Manufacturers Alliance/MAPI report, Mexico's New Tax Law Will Impact U.S. Manufacturers (LAR-487e) reviews the legislation and offers advice for re-evaluating tax positions.
The 2008 Tax Law (known by its acronym, IETU, or Impuesto Empresarial a Tasa Unica) imposes a new single rate business tax which permits Mexican states to impose a flat tax on goods and services, previously only subject to a federal tax. The law, which took effect January 1, 2008 and which is expected to remedy Mexico's budget deficit, is the most drastic change for foreign companies' tax and accounting positions in Mexico over the past 20 years.
In its original form, the IETU could have resulted in a 300 to 400 percent increase for maquilladoras, which generate some 45 percent of Mexico's export revenue. Some of the potentially harsh effects, however, were mitigated by a Presidential Decree which provides transitional relief for maquilladoras and an Internal Revenue Service ruling that provisionally accepts the position that the IETU is creditable for purposes of the foreign tax credit.
The paper, written by MAPI Attorney James C. Morgan, provides valuable insights and observations in which U.S. manufacturers with operations in Mexico will have interest.
The report is available at no charge for MAPI members while other purchasers may order the publication for $50 by clicking here. Orders also may be placed by contacting Mary Pearson, Publications and Accounting Assistant at (703) 647-5139 or via email to mpearson@mapi.net.
