BUSINESS NEWS ? Special Report
Maquiladoras ? An imminent change in tax treatment?
In November 2006, the Maquila and PITEX decrees were merged into a sole document known
as the IMMEX decree (the ?Decree?) ? which created the new IMMEX companies. This decree
governs not only the customs aspects of IMMEX companies, but also defines what a maquila
operation should be for tax purposes through its article 33. Article 33, taken together with articles
2 and 216-Bis of the Income Tax Law and several other legal provisions, are the basis for
determining the tax treatment of the maquiladora industry:
? Applicable to foreign investors who would be at risk of creating a permanent
establishment (PE) as a result of their legal and economic relationships with the Mexican
maquiladoras if not for the Decree.
? The Decree provides that the foreign investor does not create a PE from its operations
with the Mexican maquiladora and, additionally, deems such operations as if conducted
at market value.
? The Decree provides for tax profits that in practice pay no more than 17.5% Income Tax
and Sole Rate Corporate Tax, mainly as a result of the tax benefits afforded to this
However, the Decree leaves open the possibility that companies that were formerly PITEX, and
who traditionally paid Income Tax at the general rate, reconvert themselves into maquiladoras
and substantially reduce their Income Tax payments in Mexico, including, in some cases, those
derived from their sales conducted and services rendered in our country.
In order to close this loophole, the Ministry of Finance has promoted an amendment to the
definition of maquila operations provided by Article 33 of the Decree. The soon-to-be-published
amendment to the Decree includes the proposed changes to Article 33, summarized as follows:
a. In addition to manufacturing activities, goods shall now be deemed transformed when
they are (i) diluted (in water or otherwise); (ii) cleaned or cleansed; (iii) conservatives are
added to them; (iv) adjusted, cut or shaven; (iv) conditioned into doses; (v) packed, re-
packed, packaged or re-packaged; (vi) submitted to testing; or (vii) marked, labeled or
b. Goods furnished by the foreign resident that are imported temporarily should represent a
substantial proportion of inputs used for the manufacturing of the maquila product. Thus,
at least 51% of the goods utilized for the production of an export product must be foreign
in origin. This directly impacts companies that rely heavily on domestic inputs for the
manufacturing of their products (i.e., Tequila, candies, food & drinks, etc.).
c. Maquila operations should be conducted with machinery and equipment owned by the
foreign resident, which has been imported temporarily or definitively (through a change in
regime, and provided they were not owned by the company conducting the maquila
operations or any other Mexican company).
This shall not apply to companies that operated under a duly authorized maquila program
prior to November 1, 2006.
These amendments seek to cleanse the tax scheme for maquiladoras in order to achieve the
? Avoid reconversions of former PITEX companies that seek to benefit from a tax scheme
designed exclusively for maquiladoras.
? Restrict the application of such benefits to companies that reconverted after November
2006, since it will be hard for them to import no less than 51% of their inputs1 and utilize
machinery and equipment that has not been owned by a Mexican company.
? Leave certain services maquiladoras out of the tax regime (although benefiting from the
customs regime), such as those dedicated to supply and distribution, storage and
warehousing, design centers, call centers, etc.
? Companies excluded from the benefits shall pay Income Tax (in addition to the possibility
of paying Corporate Sole Rate Tax ? or IETU) at the rate of 30% as of 2010, instead of
the actual 17.5% currently paid.
We welcome the opportunity to discuss the consequences of this impending amendment on your
company, including the possibility of filing a constitutional challenge to the validity of the new
decree, since we believe there are sufficient grounds to this contest. If the latter is the case, suit
should be filed within thirty business days of the entry into force of the relevant decree.
The fact that maquiladoras must import at least 51% of their inputs is contrary to the current practice, where any percentage is
sufficient. It is worth noting that according to Mexican statistical data, domestic suppliers to maquiladoras account for no more than
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tax advice. Vázquez Tercero y Asociados assumes no liability whatsoever and expressly waives any responsibility
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