A tax legislative proposal, presented to the Mexican Congress in June 2020, would temporarily reduce the value added tax (VAT) rate to 10%, from the current rate of 16%, for the remainder of fiscal year 2020. This reduced VAT rate would be intended to provide relief regarding the coronavirus (COVID-19) pandemic.
The proposed VAT rate reduction would be effective from the date of publication of the enacted legislation in the official gazette until 31 December 2020.
The reduced VAT rate would not apply for the “northern border region”—where the VAT rate is already set at 8%—and would add a new “southern border region” where the 8% rate of VAT would apply.
The proposal would define the geographic location of both border regions to include the 20-kilometer border strip parallel to the international borders to the north and south of Mexico.
The legislative proposal is pending the congressional process and could be subject to changes.
Read a June 2020 report prepared by the KPMG member firm in Mexico
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