IVA increase coming ?

Discussion in 'Living in Cancun' started by Steve, Oct 28, 2013.

  1. Steve

    Steve Administrator Owner

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    Anyone know about the proposed IVA (sales tax) increase?

    As I understand it, IVA in Quintana Roo is at 11%, rather than the 16% that it is in most of Mexico. The 5% reduction is because Quintana Roo is classed as a 'Frontera'.

    I heard PRI are looking to remove the Frontera designation and as a result IVA will rise to 16%. Of course, prices here are a good 20% higher in the first place than other places in Mexico.

    Also heard talk a few months back about a new tax being levied on private education and rented accommodation, but haven't heard anything since.

    Anyone know any more on these?
     
  2. T.J.

    T.J. I can choose my own title Registered Member

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    EPN is proposing several fiscal changes, including doing away with the 5% exemption in IVA to border states. That's the 11% to 16% you are talking about Steve. It's QR. BCS and BCN for the most part. These states, due to tourism, bring in dramatic amounts of tax revenue, even with the exemption.

    He is proposing increases in income taxes that are basically going to affect upper income folks.

    Interesting though, are two tax, I think they are called consumption taxes.

    One is for gasoline consumption, supposedly to deal with environmental concerns. Sounds like the good old U S of A. Just tax away in different forms.

    The other is very interesting. A consumption tax on "sugary drinks", the proceeds of which will go to fight obesity. Give me a break. Will our 38% who are obese quit buying cokes if they cost another peso. Just another US style tactic that won't work as proposed. I was never a smoker but the US keeps raising the taxes on tobacco but it does not seem to reduce the number of smokers or how much they smoke. Other programs, no smoking laws, family and peer pressure do more than putting a black lung photo on cigarette packages. I know smokers here who black them out with a pen and one lady tears that part of the box off and throws it away.
     
  3. BVG_Steve

    BVG_Steve Regular Registered Member

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    what about the proposed IVA tax on purchase of home at 16%, is that still alive or dead now? Also lowering the floor for capital gains tax?

    Mr. Peña Nieto's proposed new 16% "value added" tax that would apply to many home sales, mortgage interest and rents, among other consumer spending. He also wants to place a capital-gains tax on home sales of 1.24 million pesos ($94,200) or more. The previous floor was 7 million pesos.



    A comprehensive overhaul of the Value Added Tax (VAT) Law, which includes, among other items:
    • an increase of the VAT rate from 11 percent to 16 percent in border areas and select tourist destinations
    • the application of the 0 percent VAT rate to medical and basic food items (currently exempt)
    • the application of the 16 percent VAT rate to the sale, rental and construction of housing, as well as on payment of interest on mortgages
    • the application of the 16 percent VAT to the temporary importation of goods and services, which are currently exempt if performed by maquiladoras (IMMEX)
    • the application of VAT, at a 16 percent rate (as opposed to 0 percent) to transfers between maquiladoras and to the supply of goods and services to maquiladoras by domestic suppliers

    never mind, just read this that the lower house and senate approved the increase in VAT and rejected the RE tax

    Tax Exemptions. The proposal by the executive branch to eliminate the tax exemptions for mortgage interest, sales of personal residences, and tuition for private schools will be rejected, and these exemptions will remain in effect.

    Income Tax

    The main income tax proposals are as follows:

    New Dividend Tax. An income tax will be imposed on any dividend received by individual Mexican residents and corporate and individual nonresidents from a distributing Mexican company. Dividends distributed to Mexican corporate shareholders will be exempt. The dividend tax will be imposed at the shareholder level (unlike the executive branch proposal to impose the tax at the distributing company level). The tax rate will be 10 percent of the gross dividend amount, subject to reduction pursuant to one of the 56 double tax treaties Mexico has in force. The tax is imposed only on profits generated after 2013. The tax is collected through a withholding regime imposed on the distributing company.

    Corporate Tax Rate. The corporate tax rate, which was scheduled to be reduced to 29 percent in 2014 and 28 percent in 2015 and future years, will remain at 30 percent (as proposed by the executive branch).

    Individual Tax Rate. The individual tax rate will be increased from 30 percent to 35 percent. This increase goes beyond the more modest proposed increase to 32 percent by the executive branch.

    Treaty Benefits. In related party transactions, foreign residents claiming treaty benefits may be asked to appoint a Mexican resident as their legal representative that will furnish a written declaration under oath stating that the relevant transaction is in fact taxable in the foreign country, including the foreign legal provisions that generate such double taxation. The legal representative will be jointly liable for unpaid taxes of the foreign resident.

    Foreign Tax Credit. A new foreign tax credit system will be introduced on a per-country basket basis. The system will allow, in some cases, an indirect tax credit when Mexican taxpayers receive dividends from foreign companies.

    Fringe Benefits Deduction Limitation. The deduction for nontaxable fringe benefits provided to employees, such as the savings fund, grocery coupons, etc., will be limited to 41 percent of the cost of said benefits paid to the employees.

    Immediate Deduction of Investments. The immediate expensing of certain investments will be disallowed, as originally proposed by the executive branch.

    Deduction of Deemed Costs for Real Estate Developers. This deduction, which had been proposed to be eliminated by the executive branch, will remain in effect.

    Deduction for Insurance Companies. This deduction, which had been proposed to be eliminated by the executive branch, will remain in effect.

    Sustainable Energy Accelerated Deduction. This 100 percent deduction allowable for these investments, which had been proposed to be eliminated by the executive branch, will remain in effect.

    Foreign Related Party Deductions. An executive branch proposal—to prohibit the deductibility of payments to foreign related parties when income derived from those payments is taxed abroad at a tax rate less than 22.5 percent—will be substituted with a new prohibition to deduct payments to hybrid entities not subject to income tax in their country of residence or establishment. Additionally, payments made by Mexican taxpayers to foreign related parties will not be deductible if those payments are also deductible in the foreign country.

    Capital Gains Derived from Sales Through the Mexican Stock Market. Individuals who are tax resident in Mexico and foreign tax residents will no longer be entitled to the tax exemption on capital gains derived from sales through the Mexican Stock Market. As proposed by the executive branch, a 10 percent capital gains withholding tax will be imposed, to be withheld and remitted by the intermediaries trading the stock through the Stock Market.

    Maquila Definition. The executive branch proposal to limit the definition of "maquila" to exporters of 90 percent of their sales is rejected. However, in order for existing permanent establishment protection and other favorable tax rules to apply, the maquila must derive all of its income from designated maquila operations. In addition, new requirements will be introduced as to which entity must own the equipment used by the maquila in its manufacturing operations.

    Shelter Maquila. The period in which a shelter maquila is allowed to pay reduced income taxes under the regime will be broadened from three to four years.

    Consolidation Regime. The current tax consolidation will be eliminated (as proposed by the executive branch) and replaced with a similar regime (so-called "integration regime"), which is similar to the consolidation regime. A significant difference will be that the consolidation regime allowed a five-year tax deferral, and this new integration regime will limit deferral to no more than three years.
    Flat Tax Elimination

    The 17.5 percent flat tax, which is an alternative cash basis tax, will be eliminated.
    Value Added Tax

    Border Region. The current 11 percent tax rate applicable in the border area will be increased to 16 percent.

    Tax Exemptions. The proposal by the executive branch to eliminate the tax exemptions for mortgage interest, sales of personal residences, and tuition for private schools will be rejected, and these exemptions will remain in effect.

    Maquila Regime. The proposal by the executive branch to impose a 16 percent VAT on the sale of maquila-produced goods located in Mexico between foreign residents or between a foreign resident and a maquila will be rejected. The 0 percent VAT tax rate for these transactions will remain in effect.

    The proposal of the executive branch to eliminate the exemption applicable to a maquila's importation of goods will likewise be rejected. Instead, the VAT will be technically imposed on maquilas for goods that are imported for use in maquila production, but the tax would be eliminated by a 100 percent tax credit; accordingly, there will be no cash VAT imposed on these transactions. In order to be eligible for the credit, each maquila will have to be certified by the tax authorities beginning in 2015 according to rules that will be published once the VAT reform is enacted.
    Excise Tax

    Junk Food. A five percent excise tax will be imposed on the sale of high-caloric food. This is a new tax and was not included in the executive branch proposal.

    Fuel and Pesticides. An excise tax will be imposed on fuels and pesticides.

    Soft Drinks. A tax of one Mexican peso per liter of soft drinks will be imposed, as proposed by the executive branch.
    Mining Fee

    A fee for mining rights will be charged at the rate of 7.5 percent of net profits of mining companies, as proposed by the executive branch.
     
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