What Are the Tax Benefits of Manufacturing in Mexico Under the IMMEX Program?

• U.S. and other foreign manufacturers can receive an exemption from the 16% value-added tax once approved for the IMMEX program and VAT certification.
• The approval timeline is typically several months longer for manufacturers setting up as a standalone entity versus working with a Mexico shelter company.
• Most manufacturers choose to partner with a shelter company due to the unique benefits it provides.

Mexico’s IMMEX program began in the mid-1960s to encourage foreign direct investment and allow U.S. and other foreign manufacturers to temporarily import materials needed for production.

Applying for this program is an essential first step, but it is a process that can take several weeks for approval when setting up as a standalone entity. Alternatively, when implementing shelter services in Mexico, the process is much quicker, safer, and easier to obtain.

Once approved as part of the IMMEX program, manufacturers can then apply for VAT certification to pair with it. This is where the tax benefit applies.

VAT certification allows foreign manufacturing companies to temporarily import goods, materials, and equipment with exemption from the 16% value-added tax.

Gaining IMMEX Approval

Every U.S. and other foreign manufacturer has two options when setting up production in Mexico for the first time.

1. Create a standalone entity and apply for IMMEX program approval and VAT certification process once a lease agreement with a building in Mexico has been signed.

-or –

2. Partner with a Mexico shelter company that already has both IMMEX approval and VAT certification in use by other manufacturers under its shelter. This process only requires the shelter company to apply for the licenses to be extended to the newly added building leased through the shelter.

VAT Benefits Timeline

Applying as a standalone entity can easily take several months – usually, three months to receive IMMEX approval and another three months to receive VAT certification.

Therefore, a minimum of six months can pass before any temporarily imported materials will be exempt from the 16% value-added tax.

However, Mexico’s Secretariat of Economy and the Tax Administration Service is currently experiencing longer IMMEX application process times, and approval is taking closer to eight or nine months before being granted.

Though operating as a standalone entity has its advantages, permitting and certifications typically take longer to acquire, and manufacturers are responsible for paying VAT during that time.

Since it’s a more expensive way to launch production in Mexico, implementing shelter services in Mexico is the preferred route, particularly for smaller and medium-sized operations.

Does the IMMEX Program Cover Tariffs?

It’s important to note that IMMEX is not a duty-free program. Tariffs apply depending on product origin, materials, classification, HTS code, and other tariff-qualifying measures.

IMMEX approval and VAT certification do not provide a workaround to avoid tariffs and should be accounted for separately when estimating production costs for manufacturing in Mexico.

Gain the Support of Mexico Shelter Services

The IMMEX program has benefited U.S. and other foreign manufacturers for decades, allowing them to expand production at a more cost-effective rate.

To maximize the benefits, the majority U.S. and other foreign manufacturers choose to partner with a Mexico shelter company to:

• Reduce legal risk and exposure in Mexico
• Save on administrative costs necessary for start-up
• Reduce the learning curve of operating in a foreign company
• Maintain operational control and flexibility
• Expedite the timeline for production launch

To learn more about how a shelter company can help with claiming tax benefits in Mexico and support your production goals, contact IVEMSA today.