News Regarding the Export Manufacturing, Maquila and Services Industry
The Income Tax Act in effect for 2014 includes a series of requirements needed to be met to consider that a taxpayer is performing maquila operations. One of the most controversial requirements establishes that the entire revenue from their productive activities must arise solely from their maquila operations.
However, the act does not provide any definition of what should be understood as productive activities. In this regard, the Tax Administration Service, through the 2014 Miscellaneous Tax Resolution included on December 30, 2013 in the Federal Official Gazette, published a very ambiguous definition of what should be understood as productive activities according to the provisions in Section II of Article 181 of the new Income Tax Act.
According to Rule I.3.19.1., revenue from productive activities is deemed the income obtained from rendering maquila services from productive activities to related foreign parties. The second paragraph of such rule states that the income from the buy and sell of products other than those manufactured or, otherwise, the purchase in Mexico or abroad of the products it manufactures is not considered revenue from productive activities.
Now, in order to clarify the confusion regarding what should be understood as revenue arising from productive activities, the Second Amending Resolution to the Miscellaneous Tax Resolution for 2014 was published last July 4, 2014. With that amendment, the tax authority establishes that the revenues arising from the following activities may be considered revenues related to productive activities:
- Rendering personnel services
- Leasing personal and real property
- Sale of scrap arising from materials used in productive maquila activities
- Sale of personal and real property, except for those established in the second paragraph
- Other income linked to the operations
For the above to be applicable, the taxpayer must meet a series of requirements. A limitation therein stands out whereby the revenues arising from such income may not exceed 10% of the total maquila operation income. Additionally, the taxpayer must segment its accounting, evidence that the transactions with related parties are at market price and state the income per concept in the informative return for the export manufacturing, maquila and service companies (DIEMSE).
When the taxpayer earns income from selling personal and real property, it needs to file a written letter to the tax authority exposing the business reasons arisen to conduct such transaction.
Our MXGA specialist team is duly trained to support you in any doubts you may have related to the recent tax changes.