By the Numbers: What U.S. Manufacturers Can Expect from IMMEX

Setting up a maquiladora in Mexico through the IMMEX program comes with several benefits; the most significant is exemption from the 16% VAT. However, to receive this tax savings, there are several compliance obligations required when nearshoring to Mexico. These include:

• Obtaining the right software
• Declaring all temporarily imported materials, equipment, and machinery
• Hiring a U.S. and Mexico customs broker
• Classifying and tracking all information
• Generating annual customs reports

One person cannot maintain all of these responsibilities, which is why it’s valuable and cost-effective to partner with a shelter. A shelter provides the expertise, experience, and local knowledge to ensure foreign manufacturers are compliant during all stages of production. Also, under a shelter, manufacturers are immediately approved through the IMMEX program, and can expect substantial savings as illustrated below.

16% VAT Exemption

When nearshoring to Mexico, VAT certification is not automatically given at the time of IMMEX program approval but does take immediate effect when partnering with a shelter. Manufacturers receive 16% tax savings on all temporarily imported goods, machinery, and materials needed for production, which can result in millions of dollars saved every year.

$1.6M Annual Tax Savings

As an example, a new foreign company that temporarily imports a total value of $10M in goods, equipment, and materials to their maquiladora in Mexico will save $1.6 million on VAT alone under the shelter umbrella. Whereas, a standalone entity will have to pay VAT on each import, in addition to the value of what’s declared at customs. This can quickly add up, especially when importing expensive machinery needed for production.

This calculation is based on one year, which means the longer a company goes without VAT certification, the more expensive it will be. For standalone entities, VAT certification approval can take several months, and since it’s an annual renewal, the example of $1.6 million can quickly turn to an extra $3.2 million in two years, $4.8 million in three years, etc.

$16,000 in Monthly Expenses

In addition to the millions of dollars in VAT savings a shelter provides, there are thousands of dollars in operational costs that can be saved as well. For instance, a manufacturer with 50 employees will pay at least 55% less when working with a shelter versus setting up each individual department on its own. This includes HR, accounting, and customs software and implementation.

Also, every year there are new regulations to be aware of, such as wage and tax rate changes, and software updates. Therefore, it’s valuable to have the guidance of a shelter to stay current and pivot as needed to provide the most cost-effective solutions. By alleviating these administrative responsibilities, manufacturers can focus their full efforts on production.

Though actual dollar and percentage amounts will vary depending on the size of the company and the materials needed for production, it can be assumed expenses will be substantially lower when working with a shelter than without. This can help manufacturers scale more quickly and effectively.

To learn more about the full scope of shelter services we offer and an estimate on how much your company could save, contact IVEMSA today.