This decree establishes tax incentives for companies that wish to relocate to any part of Mexico, and applies to ten key sectors in the Mexican economy.

DECREE whereby tax incentives are granted to key sectors in the export industry which consist of an immediate tax deduction for new fixed assets and an additional tax deduction for training expenditures.

On October 11th, 2023, the Mexican Official Gazette of the Federation, [in Spanish: el Diario Oficial de la Federación] (DOF), published a decree that allows tax payers who conduct export operations to apply for an accelerated tax deduction for new fixed assets, acquired for the remainder of 2023 and until December 31st, 2024, along with the additional tax deduction of 25% for expenses disbursed, with respect to training that the workers receive in the fiscal year in question. 

These incentives plans apply to companies in the general tax regime (e.g. Corporations), the simplified trust regime (applicable only to individuals, not corporations), and individuals with entrepreneurial activities, when those contributors are engaged in the industrial production, preparation, or manufacturing of goods as indicated below, and when they export:

I. Human and animal food products.

II. Fertilizers and agrochemicals.

III. Raw materials for the pharmaceutical industry and pharmaceutical preparations.

IV. Electronic components.

V. Machinery for watches, measuring, control, and navigational instruments, and medical electronic devices for medical use.

VI. Batteries, accumulators, electrical devices, electrical cables, sockets, outlets, fuses, and electrical wiring accessories.

VII. Gas, hybrid, and alternative fuel engines for cars, SUVs, and trucks.

VIII. Electrical and electronic equipment, steering, suspension, and brake systems, transmission systems, seating systems, interior accessories and metal stamping parts for cars, SUVs, trucks, trains, ships, and aircraft.

IX. Internal combustion engines, turbines, and transmissions for aircraft.

X. Non-electronic equipment and devices for medical, dental, and laboratory use, disposable medical supplies, and products for ophthalmic use.

The benefits of the decree also apply to contributors engaged in film or audiovisual production, whose content is protected by copyright and through which their works are exported.

Contributors may only choose these tax incentives when they estimate that during the 2023 and 2024 fiscal years, the total amount of revenue originating from exports will represent at least 50% of the total invoicing in each fiscal year.

Applicable benefits:

I. Immediate tax deduction for new fixed assets

This consists of performing an immediate tax deduction for the investment in new fixed assets that were acquired as of the date the present decree came into force (October 12th, 2023), and until December 31st, 2024. The investments must be in use for at least 2 years.

Percentage limit for type of goods:

For machinery and equipment according to the key activities that are used in:

The immediate tax deduction from this decree does not apply to furniture, office equipment, gas-powered internal combustion engine vehicles, equipment for automotive armoring, or any fixed asset that is not individually identifiable, nor aircraft different from crop spraying.

Contributors that apply this benefit in the 2023 or 2024 fiscal year must calculate the profit ratio on the monthly tax payments that are carried out during the 2024 or 2025 fiscal year, adding the net earnings or reducing the tax loss for the 2023 or 2024 tax year as the case may be, to the amount of the immediate tax deduction.

II.Expenses disbursed with respect to training

You may apply in the annual tax returns for 2023, 2024, and 2025, a fiscal incentive that consists of additional tax deduction that is equivalent to 25% of the expenses disbursed, with respect to the training that each worker receives in the fiscal year in question. 

For these purposes, the increase will be the positive difference between the expenses disbursed regarding training carried out in the tax year in question, and the average expenditure that the contributor may have disbursed for the same item in the 2020, 2021, and 2022 fiscal years, and as such, averaging it, when in the said tax years there may not have been any disbursement expense for training.

Training is that which provides technical or scientific knowledge that is linked to the activity of the contributor.

For the purposes of the Mexican Income Tax Law, [in Spanish: la Ley del Impuesto sobre la Renta], this training incentives will not be treated as a taxable revenue. 

It is important to note that in order to be able to apply and keep the fiscal incentives as referred to in this decree, contributors must submit a notice which states that they are choosing to have the fiscal incentives applied, are complying with their tax obligations, and are up-to-date with their tax obligations. 

The tax authorities will issue further regulations which are necessary for the correct application of this decree and the clarification of specific matters, which we will be informed of regarding these matters in all future publications. 

The newly announced fiscal benefit, as well as the talent and productive power of Mexico, makes it a perfect destination for the establishment and growth of export companies. The challenge of making an informed and successful location decision is the key factor for obtaining highly competitive projects. Our Direct Investment Advisory (DIA) practice at JA del Río has landed more than 400 successful investment projects in Mexico. We can assist you in analyzing, determining, and implementing direct investments in order to grow successfully and productively.

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If you have any questions, J.A. DEL RÍO can provide you with our experts to advise you in matters concerning compliance with your legal and tax obligations. Once again, please let us know if we may be of any further assistance to you at: contacto@jadelrio.com.