Mexico’s VAT Tax Benefits: Understanding the Basics


Manufacturing in Mexico offers several advantages for U.S. and other foreign companies. One of the most significant benefits is the value-added tax (VAT) savings that’s implemented when working under a shelter operation. To gain a better understanding of how this can benefit you, we’re breaking down the basics of the VAT tax definition, how to qualify for VAT tax exemption, and recent changes that manufacturers need to know.

Defining Mexico’s VAT Tax

As a U.S. manufacturer operating in Mexico, a 16 percent VAT tax is applied to all goods, equipment, and machinery temporarily imported into the country. It’s calculated by the price of these materials when they’ve left the U.S. and is different from customs duties also incurred along the way. Being exempt from VAT tax can significantly impact the cost-effectiveness of manufacturing in Mexico.

Who’s Exempt from VAT Tax in Mexico?

Under Mexico’s maquiladora program, shelter service operators and their partners are exempt from paying VAT tax as long as the finished goods are eventually exported. As of 2015, maquiladoras are required to obtain a VAT certification within Mexico in order to qualify for the exemption. Certification is categorized by different tiers, each with specific requirements applicants must meet with regards to inventory and compliance measures.


Since shelter companies have already been approved for and maintain the proper certifications necessary for VAT tax exemption, it serves as a great cost- and time-saving benefit for U.S. manufacturers wanting to operate in Mexico. Without the aid of a shelter operator, the application time can be pending for months before there’s a chance for approval. This causes all materials imported into Mexico during this waiting period subject to the 16 percent tax rate.

Maximize Cost Savings by Working with a Shelter Company

Extensive VAT tax requirements can present hurdles for U.S. and other foreign manufacturers that wish to expand their operations. When manufacturing in Mexico, it’s most cost-effective to work with a shelter company. It helps expedite setup time, due to the fact shelters already have the proper certifications and compliance measures in place.


It also allows U.S. manufacturers to benefit from the VAT tax exemption from day one, rather than calculating additional costs during the months an application is under review. Furthermore, as a U.S. manufacturer operating in Mexico, partnering with a shelter provider mitigates the risk of non-compliance and lowers the learning curve necessary to keep up with important changes.


To learn more about VAT tax benefits and other cost-saving opportunities, contact IVEMSA today.





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