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Mexico's Congress Passes Tax Bill That Would Hike VAT in Border Regions

Tuesday, November 5, 2013
By Maja Wallengren

Nov. 1 --Mexico's congress passed a tax reform measure that would make changes to customs practices and raise the value-added tax on export assembly plants in the border regions.

The measure, which would also raise income taxes and create new duties on capital gains and sugary drinks, now awaits President Enrique Pena Nieto's signature.

Pena Nieto had been pushing the new tax bill as a way to reduce the nation's dependence on oil revenue and promote growth.

One provision in the bill would raise the VAT to 16 percent in border regions from the current rate of 11 percent. The tax increase would go into effect Jan. 1.

Congress remains “concerned about the negative impact this can have on businesses,” but a modification inserted by the lower house of Congress “as a last minute effort to support the maquila industry” was kept in the Senate version the tax bill, Congressman Mario Sanchez told Bloomberg BNA.

Sanchez, who is the chairman of the Mexican Congressional Economy Commission, said “assembly plant manufacturing companies that are certified as exporting the final product will be able to get an exemption on the payment of tax on temporary imports.”

Companies that are not yet certified have one year to get certified before the elimination of the tax exemption will take effect, Sanchez said.

The VAT increase in the border regions will harmonize the VAT for assembly plants--known as maquiladoras--with the 16 percent paid by businesses in the rest of the country.

To contact the reporter responsible for this story: Maja Wallengren in Mexico City at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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