On 31 December 2018, Mexico published in the official gazette a decree on tax incentives for northern border regions. The incentives include:
The incentives apply for income exclusively sourced in the qualifying regions (see below) and for goods and services supplied in the qualifying regions. In this respect, at least 90% of the income of a taxpayer must be sourced from a qualifying region for the incentives to apply.
To qualify, taxpayers must prove that they have been resident in a qualifying northern border region for at least 18 months and register in a newly established registry for the incentives. However, taxpayers may still be able to benefit subject to certain conditions, including that they have the economic capacity, assets, and facilities to carry out their operations and business activities in a qualifying region. Taxpayers outside qualifying regions with a branch in a qualifying region, and vice versa, may also be eligible, subject to certain conditions.
Certain taxpayers are specifically excluded from the income tax incentive, including, among others:
In addition, certain income is ineligible, including income from intangible assets and digital commerce. The VAT incentive is also limited in certain cases, including in respect of immovable property, intangible assets, and digital content.
Northern border regions covered by the incentives include the following municipalities by state:
The decree entered into force on 1 January 2019 and is effective for 2019 and 2020. Authorization for the incentives should be applied for by 31 March of the year a taxpayer intends to apply the incentives.
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