MEXICO SUPPORTS NEARSHORING WITH NEW TAX INCENTIVES

On October 11, 2023, the "Decree granting tax incentives to key sectors of the export industry through immediate deduction of new fixed assets investment and additional deduction of training expenses" was published in the Official Gazette of the Federation. This decree provides tax benefits to companies in the export industry's key sectors that are interested in expanding their operations through the "nearshoring" strategy.

This incentive enables taxpayers to deduct a portion of their investment in new fixed assets immediately. The deduction percentages range from 56% to 89%, depending on the specific type of fixed asset. The previous depreciation percentages used in the Income Tax Law have been replaced by this new scheme.

The incentive is applicable to:
1. legal entities taxed under the general regime stipulated in Title II of the Income Tax Law;
2. legal entities that pay taxes under the Simplified Trust Regime; and
3. Taxpayers who operate under the general regime for business activities and professional services qualify for incentives.

To be eligible, taxpayers must: i) produce, process, or manufacture the goods described in the Decree that are exported; or ii) manufacture cinematographic or audiovisual works with protected content that are exported.

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The industries eligible for this incentive include semiconductors, automotive manufacturing, electronics, medical devices, pharmaceuticals, agribusiness, human and animal food, and film/audiovisual production.Companies involved in the production, processing, or manufacture of goods related to human and animal food, fertilizers,and agrochemicals are eligible for the tax incentives mentioned above.