The Mexican Government will grant tax incentives for companies that decide to establish or relocate their facilities in the Interoceanic Corridor of the Tehuantepec Isthmus
Such incentives, which will be available once the Federal Government publishes the tender guidelines for the granting of concessions for the development of the Development Poles, will support companies investing in the region. Below the details of the new tax rules.
On June 5, 2023, the Ministry of Treasury issued the tax benefits applicable to taxpayers that decide to establish or relocate in the so-called Development Poles of the Inter-Oceanic Corridor of the Tehuantepec Isthmus. Such tax incentives are intended to foster the economic growth of the region, as well as to encourage the creation of jobs through private investment and will be granted to companies that are awarded with concession titles for land plots located in the Development Poles through public tenders to be launched soon by the Federal Government.
The Inter-Oceanic Corridor is an strip of land running along the Tehuantepec Isthmus (southeastern Mexico) and connecting the Pacific ocean with the Gulf of Mexico, where railroads, roads and other infrastructure is being built.
Who is eligible?
The tax benefits will be granted to taxpayers under the simplified trust regime for corporations, individuals with business and professional activities, as well as corporations residing in Mexico and abroad with a permanent establishment that receive income from the following productive economic activities:
- Electrical and electronics
- Automotive (electromobility)
- Auto parts and transportation equipment
- Medical devices
- Electric power generation and distribution equipment (clean energy)
- Machinery and equipment
- Information and communication technologies
- Metals and petrochemicals
The Government Board of the Interoceanic Corridor of the Tehuantepec Isthmus may determine any other economic activity subject to such tax incentives.
What requirements must be complied with?
Taxpayers interested in obtaining the tax benefits must comply with the guidelines issued by the Ministry of Finance and Public Credit (SHCP) and comply with the following requirements:
i. Timely compliance of their tax obligations;
ii. To hold a valid concession title over, or to be the owner of a plot of land located within a Development Pole;
iii. To submit the investment project for which the concession title referred above was granted;
iv. To have tax domicile in the Development Pole where the eligible productive economic activities are carried out.
The Ministry of Finance will issue the relevant certificate of compliance with the requirements set forth above.
What are the tax benefits?
- Income Tax Credit
Eligible taxpayers will enjoy an Income Tax (Impuesto sobre la Renta) credit considering only the income attributable to the economic activities carried out within the Development Poles and the deductions that are strictly necessary to obtain such income.
During the first three fiscal years after obtaining the certificate of compliance issued by the Ministry of Finance, taxpayers will be entitled to a tax credit equivalent to 100% of the Income Tax. During the following three fiscal years, the tax credit will be equivalent to 50% or up to 90% of the Income Tax in the event that certain minimum employment levels are met in accordance with the guidelines soon to be published by the SHCP.
- Immediate deduction of 100% of the original investment amount
During the first six years after obtaining the certificate of compliance issued by the Ministry of Finance, the eligible taxpayers may make an immediate deduction of 100% of the original amount of the investment of new fixed assets used in the Development Poles instead of applying the maximum percentages authorized under the Income Tax Law.
- Value Added Tax Credit
During the first four years as of June 6, 2023, taxpayers that carry out productive economic activities within the Development Poles, that sell goods, provide independent services, or grant the temporary use or enjoyment of goods to companies that carry out productive economic activities also within the aforementioned Development Poles will enjoy a tax credit equivalent to 100% of the Value Added Tax that must be paid for the activities described above.
Taxpayers applying for the Income Tax credit and immediate deduction benefits will be subject to certain limitations to apply other tax benefits.
Undoubtedly, these new tax benefits will foster installation and relocation of productive facilities along the Interoceanic Corridor and will help companies to invest. Garrigues’ multidisciplinary team, including our infrastructure and tax experts, are providing comprehensive legal and tax advice to clients interested in accessing these tax benefits once the Federal Government call the public tenders for the concession of land plots related to the Development Poles, which is expected to happen soon.