VAT in Mexico
Updated on Tuesday 30th January 2018
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The VAT in Mexico (locally known as IVA) is payable at a general rate of 16% on the sales of products and services. The VAT also applies to lease payments and imports of products and services. In this article, our Mexico company formation agents make a brief overview of the VAT in Mexico.
Further details on the VAT in Mexico
Temporary imports under IMMEX (an incentive program from the local government for companies which are manufacturing in the country and exporting products) and similar programs are also subject to the general VAT rate.
Certain imports could qualify for a VAT exemption if they are able to obtain special certifications from the tax authorities in connection with the appropriate control of such imports.
This exemption comes in the form of an immediate VAT credit at the time when the products clear the customs, which implies that the temporary import is effectuated on a cashless basis. Our company formation consultants in Mexico can offer further details related to this matter. We can also help you open a company in Mexico.
The VAT acquitted by businesses on their purchases and operations connected to VATable activities, such as operations which are subject to a 0% VAT rate in Mexico, can generally be credited against their liability for the VAT. This can be achieved for the VAT they gather from clients on their own sales, rendered services and so on.
The input VAT credit on products or services of a general nature of a business is calculated based on a VAT ratio proportional to the VATable versus VAT operations, be it taxable and exempt, effectuated by the taxpayer. The same applies for those which are not specially identified with taxable or exempt operations for VAT purposes.
Creditable VAT acquitted on the purchases and expenses in excess of VAT collected from clients is recoverable through either a refund, offset against other federal taxes or a credit against the following VAT liabilities.
Exemptions from VAT in Mexico
In Mexico, there are numerous goods and services which are exempt from VAT, such as:
• The sales of houses, except for the ones which are used for commercial purposes;
• The retail sales of books, newspapers and magazines;
• Financial instruments;
• Gold which is at least 99% pure;
• Other goods and services: our Mexico company registration advisors can offer more details on these.
For more details about the sales tax rate in Mexico, or for assistance in setting up a company in Mexico, please contact our friendly staff.