Taxation

Pitfalls Faced by Maquiladoras when Selling into the Domestic Mexican Market

By Alejandro Fernando Toulet Lazos and Bridget Guzman, Toulet, Gottfried, Dávila y Martínez, S.C.

Currently, maquiladoras entities import their raw materials into Mexico and thereafter export a finished product. However, what happens if instead maquiladoras sell their products into the Mexican domestic market?

If maquiladoras sell their products in Mexico, their parent companies will have a permanent establishment for tax purposes in Mexico, which will force them to pay taxes in Mexico and be subject to Mexican tax legislation. Likewise, if a maquiladora company sells into the Mexican domestic market, it will lose, with respect to such sales, its preferential tax treatment.

With respect to the parent company of the maquiladora that sells into the domestic market, it will have to obtain a Mexican Federal Taxpayer number and record its Permanent Establishment with the Mexican Tax Authorities. It is impor- tant to bear in mind that the Immex Decree compels maquiladoras to export at least 10% of their total production. However, the Mexican Income Tax Law states that 100% of the production must be exported. Otherwise the parent company will have a permanent establishment in Mexico.

In order to solve this problem, many companies have incorporated a Mexican trading company which imports the products into Mexico on a permanent basis and sells them into the domestic market. This alternative has the distinct customs disadvantage in that maquiladoras cannot perform virtual transfers with a trading company. Therefore, the merchandise must be physically exported from Mexico by the maquiladora and thereafter imported by the trading company.


 

Alejandro Fernando Toulet Lazos

Alejandro Fernando Toulet Lazos

Toulet, Gottfried, Dávila y Martínez, S.C.,Ciudad Juárez, Mexico
T: +52 656 629 2779
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Toulet, Gottfried, Dávila y Martínez is a full service law firm that provides legal and business consulting services to national and international entities. They have extensive experience with international organisations is the basis for their multilingual and multicultural expertise.

Alejandro Fernando Toulet Lazos is a partner with Tou- let, Gottfried, Dávila y Martínez, S.C. He is in charge of the corporate, real estate and mergers and acquisitions areas. The emphasis in his practice has been planning, structuring, financing and implementing transactions with foreign corporations doing business in Mexico.
Bridget Guzman

Bridget Guzman

Toulet, Gottfried, Dávila y Martínez, S.C.,Ciudad Juárez, Mexico
T: +52 656 629 2779
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Bridget Guzman is a lawyer with Toulet, Gottfried, Dávila y Martínez, and her practice has been emphasized in the criminal area as well as in litigation matters before the state and Federal Court.


Published: Winter 2017 l Photo: mariana_designer - Fotolia.com

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