© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. January 15, 2014 VAT Certification & Key Issues Héctor Silva WMTA breakfast meeting.

Presentación del tema: "© 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. January 15, 2014 VAT Certification & Key Issues Héctor Silva WMTA breakfast meeting."— Transcripción de la presentación:

1 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. January 15, 2014 VAT Certification & Key Issues Héctor Silva WMTA breakfast meeting

2 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 2 Tax Reform 2014 VAT Certification VAT on temporary imports Elimination of exemption on VAT on the temporary importations of materials and M&E by maquiladoras. -This measure created a serious concern due to: 1.High volumes of temporary importation 2.Financial cost 3.Administrative burdens to recover the VAT with the tax authorities.

3 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 3 Tax Reform 2014 VAT Certification VAT on temporary imports (2) Applicable VAT credit to certified maquilas. -The VAT credit will be equal to the VAT liability in importation that will reduce payment in such a way that they don’t have a cash VAT liability. A maquiladora that does not obtain certification status may guarantee the contingency of the tax liability via a bond with an authorized entity.

4 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 4 Tax Reform 2014 VAT Certification Maquiladora certification for VAT purposes A Maquiladora may obtain a certification status from the tax authorities that validates that they are properly operating the maquila program in compliance with the purposes it was designed for. The certification allows a maquiladora to credit in the month the VAT is paid. The payment of VAT, when applicable, will start one year from the date the tax authorities published the requirements to obtain certification status in order to give proper time to Maquiladoras to achieve certification. On January 1, 2014 the tax authorities published in the Miscellaneous Tax Rules for Foreign Trade the requirements to obtain certification and benefits of such certification.

5 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 5 Tax Reform 2014 VAT Certification Maquiladora certification for VAT purposes (2) The certification is on a one-year basis and the maquiladora may renew certification up to 30 days prior to expiration. If a certification is suspended, the taxpayer will have 10 days to produce evidence to clear the cause of the suspension. If a certification is cancelled, the taxpayer will not be able to obtain another certification for 24 months. A certification request may be filed between April 15 and October 22, 2014 depending on the taxpayer’s location. Certification will be renewed automatically provided the maquiladora files a notice before the term expires and it continues to be in compliance. A three-tier rating system (AAA, AA and A) will be used to assess maquiladoras’ controls and overall tax and customs compliance:

6 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 6 Tax Reform 2014 VAT Certification Maquiladora certification for VAT purposes (3) – "A" rating

7 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 7 Tax Reform 2014 VAT Certification Maquiladora certification for VAT purposes (4) – "AA" rating

8 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 8 Tax Reform 2014 VAT Certification Maquiladora certification for VAT purposes (5) – "AAA" rating

9 Tax Reforms Key Issues

10 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 10 Issue:Maquiladora’s Income Tax 2014 Tax reform:Revocation of the Income Tax Reduction Decree Consequence:Income Tax rate of 30% over the tax base Suggestions:- A more efficient management of the financial profit and taxable base - Evaluate if the Maquiladora Regime is still beneficial to the company. Tax Reform 2014 Key Issues

11 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 11 Issue:Permanent Establishment protection for its non resident related party 2014 Tax reform:The Maquiladora will only have 2 options to determine its taxable base: - Applying the Safe Harbor, requiring to report as the minimum taxable profit, the higher between 6.5% over expenses and 6.9% over assets - Obtaining an Advanced Price Agreement “APA” with Mexican tax authorities Consequence:Most likely to have an important increase in the profit markup, which will originate a larger taxable base Suggestions:- Evaluate if the operations in fact create a PE in Mexico - Perform a feasibility analysis to define requesting an APA option - Evaluate if the Maquiladora Regime is still beneficial to the company Tax Reform 2014 Key Issues

12 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 12 Issue:Deduction of exempt wages 2014 Tax reform:Limited to 47%-53% Consequence:- Increase of the taxable base (when applying APA) - The deduction of maquiladora services for the foreign related party will decrease, no matter that the taxable profit will be higher Suggestions:- Applying the fiscal benefit decreed on December 26 th 2013 to deduct exempt wages - Separating at the accounting records, maquila operation revenues from non maquila operation revenues - Separating at the accounting records, exempt wages from taxable wages Tax Reform 2014 Key Issues

13 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. 13 Issue:M&E property of the foreign related party 2014 Tax reform:At least 30% of the M&E should be owned by the foreign related party Consequence:If the maquiladora doesn’t comply with this requirement, it would not be considered as maquiladora for Income Tax purposes and would loose the PE protection for its foreign related party. Suggestions:- If the company doesn’t comply with this requirement and has being complying with article 216-bis as of 2009, will be able to apply the fiscal benefit decreed on December 26 th 2013, to have a 2 year period to comply with the requirement - Evaluate if the Maquiladora Regime is still beneficial to the company Tax Reform 2014 Key Issues

14 © 2014 Galaz, Yamazaki, Ruiz Urquiza, S.C. Deloitte se refiere a Deloitte Touche Tohmatsu Limited, sociedad privada de responsabilidad limitada en el Reino Unido, y a su red de firmas miembro, cada una de ellas como una entidad legal única e independiente. Conozca en www.deloitte.com/mx/conozcanos la descripción detallada de la estructura legal de Deloitte Touche Tohmatsu Limited y sus firmas miembro. Deloitte presta servicios profesionales de auditoría, impuestos, consultoría y asesoría financiera, a clientes públicos y privados de diversas industrias. Con una red global de firmas miembro en más de 150 países, Deloitte brinda capacidades de clase mundial y servicio de alta calidad a sus clientes, aportando la experiencia necesaria para hacer frente a los retos más complejos de los negocios. Los más de 195,000 profesionales de la firma están comprometidos con la visión de ser el modelo de excelencia. Tal y como se usa en este documento, “Deloitte” significa Galaz, Yamazaki, Ruiz Urquiza, S.C., la cual tiene el derecho legal exclusivo de involucrarse en, y limita sus negocios a, la prestación de servicios de auditoría, consultoría fiscal, asesoría financiera y otros servicios profesionales en México, bajo el nombre de “Deloitte”. Esta publicación sólo contiene información general y ni Deloitte Touche Tohmatsu Limited, ni sus firmas miembro, ni ninguna de sus respectivas afiliadas (en conjunto la “Red Deloitte”), presta asesoría o servicios por medio de esta publicación. Antes de tomar cualquier decisión o medida que pueda afectar sus finanzas o negocio, debe consultar a un asesor profesional calificado. Ninguna entidad de la Red Deloitte, será responsable de pérdidas que pudiera sufrir cualquier persona o entidad que consulte esta publicación. Contact information: Héctor Silva hsilva@deloittemx.com +52 (664) 622 7840