Mexico: Reduced income tax and VAT rates as incentives for the northern and southern border regions

Mexico: Reduced income tax and VAT rates as incentive

Four decrees issued by the Mexican executive authority on 27 November 2020 (and pending publication in the official gazette) provide tax incentives—including reduced rates of income tax and value added tax (VAT)—for Mexico’s northern and southern border regions. The measures have an effective date of 1 January 2021.

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Among the tax incentives are the following:

  • A tax incentive regime is to be extended until 2024, with a reduction of the VAT rate to 8% (from 16%), a reduced rate of income tax to 20% (from 30%), and regarding the special excise tax (IEPS) on gasoline.
  • In addition to the northern border region, taxpayers in 22 municipalities in the southern border region (that is, Mexico’s border with Guatemala) will also be eligible for the tax incentives of the reduced rates of VAT and income tax as well as the tax incentives regarding IEPS imposed on gasoline.
  • To promote economic activity, an exemption from the general import tax (IGI) and an exemption from the customs processing fee (DTA)—as well as the reduced VAT rate of 8% and the reduced income tax rate of 20%—are being made available for taxpayers in Chetumal (a city located in the state of Quintana Roo on the Yucatán Península).  


For more information, contact a tax professional with the KPMG member firm in Mexico:

Antonio Zuazua | +52 81 8122-1938 |azuazua@kpmg.com.mx

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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