Special Shelter Companies Announcement11.17.15
Companies Operating Under Shelter Umbrella May Continue to Do So
Additional benefits continue to be sought
Mr Luis Videgaray, Mexio’s Minister of Finance today announced that SAT, the Mexican IRS, has removed the 4 year time limit foreign companies were allowed to operate under a shelter umbrella that was previously legislated in the 2014 Fiscal Reforms.
The announcement was made November 17, 2015 at the annual INDEX conference in Mexico City. INDEX, an association representing the Maquiladora and Export Manufacturing Industry in Mexico, and particularly the INDEX Shelter Committee, has been the driving force in these negotiations with governmental agencies.
“The authorities have been very responsive to our issues and understand the economic benefit shelters provide to Mexico,” stated Sergio Tagliapietra, President of the INDEX Shelter Committee and CEO of the shelter company IVEMSA. “Government leaders, together with the members of INDEX, share the goal of making Mexico an attractive and viable place to conduct global commerce. We look forward to continuing to work together to meet that goal.”
As a result of the announcement, companies are no longer required to incorporate in Mexico as an independent business. A final determination as to whether the time period will be unlimited or be extended several years, is being sought over the next few weeks. INDEX members will continue to vigorously advocate in favor of companies operating under a shelter.
Due to the fact that shelters are recognized as vehicles to create jobs and economic growth within Mexico, as an incentive, companies under a shelter are not required to pay income tax for the first 4 years. As part of the agreement with SAT however, beginning in the 5th year of operation under a shelter, companies will be required to pay taxes as an independent maquiladora. The determination of the taxes will be made based on either the Safe Harbor or Transfer Pricing Study. For an English language version of these policies please contact IVEMSAand put “Safe Habor/Transfer Pricing” in the message.
To avoid double taxation, Maquiladoras that currently pay taxes directly to SAT receive either a credit from the IRS or some other type of compensation. To make operations for shelter clients seamless, the INDEX Shelter Committee is also undertaking an initiative that seeks an agreement with the U.S. IRS to accept invoices from shelter companies that pay SAT on behalf of their clients. To that end, the group has already sought an opinion from the accounting firm of Baker & McKenzie and will open full negotiations with the IRS.
However the tax situation is resolved, there are the major benefits to working within a shelter company umbrella remain. For the first four years of shelter operation, companies pay no income tax. Beginning in the 5th year, while they will have to pay income tax, companies under shelters will continue to receive the convenience of comprehensive administrative services that, due to economies of scale, are available at a lower cost than could be independently provided.
If you have any questions please contact IVEMSA.