On March 23, 2017, the Autoridad Federal de Zonas Económicas Especiales (AFZEE) (Federal Authority for Special Economic Areas) and the Instituto Mexicano de Contadores Públicos A.C. (IMCP), signed a feedback collaboration agreement on opportunity areas regarding the application of tax incentives on Special Economic Zones (ZEE), as well as in with regards to foreign trade and customs.
The purpose of said agreement is to issue recommendations, mechanisms and criteria to warrant that the professional services offered by associates are in compliance with the needs of companies established on the ZEE, as well as identify areas of opportunity in the operation of tax incentives in said zone.
It is important to state that the publication of these rules by the Secretaría de Hacienda y Crédito Público is pending, whereby the requirements for making the analysis are to be specified and therefore publish the rules applicable to taxpayers located at these zones.
What are Special Economic Zones?
The purpose of ZEE is to promote economic growth in the regions of the country that are lagging behind. This growth will be reflected through the promotion of investment, employment, among others.
The ZEE shall be a geographically limited zone; located in a place with natural and logisticadvantages to become a highly productive region.
To begin, 4 Special Economic Zones were established on the following areas:
1. Lázaro Cárdenas with neighboring municipalities from Michoacán and Guerrero.
2. Passage from Istmo de Tehuantepec including Coatzacoalcos, Veracruz and Salina Cruz.
3. Puerto Chiapas at Chiapas.
4. Progreso, Yucatán
Investment Tax Benefits
Even though the corresponding statements have not been published, it has been established on press interviews that said tax benefits apply to individuals and artificial persons deciding to invest and operate at these zones, as follows:
1. In connection with Income Tax (ISR), discounts of 100% will be granted during the first 10 years and 50% during the following 5 years to individuals and artificial persons with a business activity.
2. Regarding Value Added Tax (IVA), the goods and services introduced to said Zones will be levied at a 0% rate, provided these activities are performed by companies residing in Mexico.
3. When there is extraction of goods from Special Economic Zones for introduction to the rest of the country, said goods will be under a 16% tax rate.
4. In connection with Social Security, tax credits will be granted on employer fees for health during the first 10 years at a discount rate of 50% and a 25% discount on the following 5 years.
5. A special customs regime is established whereby reductions in customs duties and an exemption on foreign trade taxes are generated.
Expedite proceedings may be performed by paying foreign trade taxes upon extracting merchandise from the Zone with the lesser duty. These benefits shall have a minimum duration of eight years.
6. Exemption on the payment of duties on the use of the Federation’s realproperty.
7. Granting exemptions by the state and municipal governments or at least matching rates or tariffs with terms homologous to those granted by the Federation in the declaration of Special Economic Zones. This benefit includes payroll tax, property tax, tax on the purchase of real property and Tax on Lodging Services.
In conclusion, the purpose of the ZEE Act project is to stimulate investment by implementing different tax benefits as well as the generation of employment within these new zones, which may be of interest to companies intending to invest in the country, because, regardless of the possible increase in costs due to the transportation of merchandise that may exist, especially to countries such as Canada or the United States, derived from the location of the ZEE, an analysis is worthwhile as tax savings may be significant.
However, we await the publication of the regulations by the authority and shall inform these shortly.
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