As indicated in prior communications, the Mexican tax reform
that entered into force in January 1, 2014 narrowed the concept of
maquiladoras for income tax purposes. Under the new definition,
maquiladoras income must come exclusively from its maquila services
to shield them from creating a permanent establishment for their
principals, specifically prohibiting them from selling any
inventory or manufactured products in Mexico.
Transitory provisions deferred the enforcement of the reform
through September 30, 2014. Thus, considering that the deferred
term for implementation of the revised maquiladora activities ends
today, we would like to remind you that as of October 1, 2014 your
maquiladora operations must be very careful not to be involved in
sales of inventory or manufactured products to non-maquiladora
entities in Mexico.
Failure to comply with such provisions could trigger the risk of
creating a permanent establishment in Mexico for the foreign
principal, since the maquila companies will not be entitled to
apply the safe harbor rules for such purposes.
It is worth mentioning that maquila companies will continue to be
allowed to perform several activities that can be construed as
maquila activities, such as the provision of personnel services to
its related parties; leasing of movable and real property; selling
waste & shrinkage of material used in its productive
activities; sale of movable assets (excluding inventory and
manufactured products) and real property; interests; and any other
income related to its productive activity, provided these are
different from the ones obtained from the sale and distribution of
finished products for its further resale.
If you need any further assistance for the analysis and review of
your current structure and the application of the abovementioned
rules, please do not hesitate to contact us as soon as
possible.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.