The objective of the executive order is to encourage new investments, promote dual training programs and boost innovation in Mexico.
January 21, 2025, the Mexican government enacted an executive order introducing new tax incentives as part of the "Plan Mexico" initiative with the goal of positioning Mexico among the top 10 global economies by promoting new investments, nearshoring, local training and innovation.
Background
On November 27, 2024, Plan Mexico was presented, which included the creation of the Advisory Council for Regional Economic Development and Relocation, responsible for promoting relocation, attracting investments, generating jobs and fostering regional development. This council will drive projects with mixed investments and infrastructure to strengthen industrial corridors and wellness hubs, with a focus on technical education and certification programs. Consequently, on January 21, 2025, the executive order granting tax incentives was published in the Official Gazette of the Federation (Diario Oficial de la Federación) as part of this national strategy, which reflects Mexico's commitment to fostering economic growth in the region.
The objective of the executive order is to encourage new investments, promote dual training programs and boost innovation in Mexico. It introduces significant changes to the existing tax framework, replacing previous incentives for the export industry with more comprehensive benefits designed to stimulate economic growth and development, and will extend until 2030.
Key Tax Incentives Included in the Executive Order
Immediate Deduction of Fixed Assets
The executive order allows for the immediate deduction of new fixed assets acquired between January 22, 2025, and September 30, 2030. This provision is intended to incentivize businesses to invest in new equipment and infrastructure, thereby enhancing productivity and competitiveness. Businesses can deduct the full cost of these assets in the year of acquisition, providing a substantial tax benefit and encouraging timely investment.
Additional Deductions for Training
In a bid to support workforce development, the executive order provides additional tax deductions for expenses related to training programs. This measure encourages businesses to invest in the skills and capabilities of their employees, aligning with the broader goal of fostering innovation and adaptability in the workforce. Businesses can claim additional deductions for expenses incurred in training programs. This incentive is designed to support the development of a skilled workforce. Companies wishing to deduct training expenses must have, among other requirements, a collaboration agreement with the Ministry of Public Education.
Authorized Budget
The executive order establishes an Evaluation Committee to oversee the application of tax incentives, with a total authorized budget up to $30 billion Mexican pesos (approximately USD$1.5 billion) during the executive order's effective period. As such, USD$1.3 billion will be allocated for investment in new fixed assets and USD$73 million for additional deductions in training and innovation expenses.
Applicants
The following may be considered applicants for the tax incentives: (i) entities taxed according to Title II, of the Mexican Income Tax Law (MITL) (Ley del Impuesto Sobre la Renta), meaning any legal entity validly existing and legally obligated to pay taxes in Mexico; or according to Title VII, Chapter XII of the MITL, meaning an entity organized and treated under a "special regime"; and (ii) individuals taxed under Title IV, Chapter II, Section I of the MITL, referring to individuals who earn income from professional activities, business activities, leases and other sources of the kind.
Application Requirements
To apply for these incentives, eligible parties must meet the following requirements:
- Registration: Applicants (entities or individuals) must be registered in Mexico's Federal Taxpayers Registry.
- Tax compliance: Applicants must have a positive tax compliance opinion.
- Investment projects: Submission of detailed investment projects is required.
- Compliance certificate: Obtaining a compliance certificate from the Evaluation Committee is necessary to qualify for the incentives. The Evaluation Committee will evaluate each investment project and issue a respective compliance certificate.
Exclusions
The tax incentives provided in the executive order will not be granted, among others, to taxpayers having firm tax credits not guaranteed or being in the process of liquidation.
Conclusion
The executive order represents a significant opportunity for companies or individuals looking to expand their operations in Mexico, especially those interested in innovation and technical training. Applicants should carefully evaluate the requirements and potential benefits of these tax incentives to maximize their positive impact. It is recommended that applicants interested in these tax incentives consult with legal counsel and tax advisors to ensure compliance with all the requirements established in the executive order.
For More Information
If you have any questions about this Alert, please contact Eduardo Ramos-Gómez, Geoffrey M. Goodale, Hernan Gonzalez Moneta, Raul Rangel Miguel, any of the attorneys in our Mexico Business Group, any of the attorneys in our International Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
