As a direct result of globalized manufacturing processes, maquiladoras (currently "IMMEX companies”) have positioned themselves as one of the most significant Mexican participants in the creation of value chains (very well, the most important one).
Since their creation, maquiladoras have benefited from several tax incentives and streamline administrative processes, in order to promote job creation and growth in different parts of the country.
Due to the inappropriate use of these benefits granted to IMMEX companies, and over the course of several federal administrations, certain benefits have been restricted or eliminated altogether, and greater administrative responsibilities have been placed on IMMEX companies.
As an example of tightening measures, the Federal Revenue Law for the Fiscal Year 2023 anticipates a 34% increase in the “Import Duties” bracket collection as compared to 2022. This increase in the Federal Government's projected collections suggests that, for the current fiscal year, tax authorities will step up their review and audit procedures of different foreign trade companies, particularly those companies that operate under the IMMEX Program.
Due to the above, IMMEX companies will need to monitor closely that they are in compliance with their tax and customs obligations in order to avoid contingencies and, more importantly, ensure continuity of their permit authorizations.
For IMMEX companies, it is highly recommended they pay special attention and comply with the following obligations:
- Appropriate management of inventory control system (Annex 24): Most contingencies arise from audits performed by tax authorities in relation to this IMMEX obligation.
- Appropriate management of Credit and Guarantee Accounts Control System (Annex 30): With the VAT and Excise Tax Certification going into effect, Administrative responsibilities for IMMEX companies have increased significantly; for instance, filing of discharge reports of temporary imports used during the production process, have make it easier for authorities to detect possible non-compliance related to returns of temporarily imported goods and value added tax omissions.
- Filing of Notices for purposes of the IMMEX Program and VAT and Excise Tax Certification: Requiring the filing of these notices allows authorities to have updated information and most importantly to ensure compliance with the various obligations applicable to IMMEX companies. Some examples of notices are those pertaining to changes of corporate name, tax domicile, customers and suppliers, (both domestic and foreign), among others.
- Proper documentation and record keeping related to the transfer and return of goods: IMMEX companies are required to keep accurate and updated records of their operations and, in particular, of the transfer and return of temporarily imported goods, which are of significant importance.
- Fixed assets control: Keeping of requisite customs records to prove the legal importation, permanence, or possession of foreign fixed assets, as well as their destination in case the temporarily imported goods have been returned or definitively imported.
Failure to comply with the above obligations could trigger, in addition to tax penalties, the suspension and/or cancellation of the authorizations to operate under the IMMEX Program and of the VAT and Excise Tax Certification.
Additionally, even if the loss of the VAT and Excise Tax Certification does not imply, per se, the impossibility to operate under the IMMEX Program, it could create a significant impact on cash flow operations for the company and reduce its competitiveness against third parties.
The Foley & Lardner team can assist with review and preventive compliance audits to detect potential risks in the operation of the IMMEX Program and the VAT and Exercise Tax Certification and, if necessary, advise on the appropriate corrective actions.
In the event that audit proceedings or invitation letters (amicus proceedings) have been initiated by tax and customs authorities, we have the experience to map out the current tax status of a company at the point of the proceedings and, if necessary, reduce potential contingencies through various corrective mechanisms available under Mexican law.
Our team can also assist with developing strategies to revoke or reduce tax contingencies when rulings by tax and customs authorities negatively impact IMMEX companies.
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.
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