New Rules for Taxpayers’ CFDIs Subject to Fiscal Benefits for Mexico’s North Border
January 18, 2019
On 31 December 2018 a decree establishing certain tax benefits for the North Border Zones in Mexico was published in the country’s Official Journal. The benefits aim to bring some stimuli and competitivity to taxpayers resident in the targeted area during 2019 and 2020 by reducing the rate of income tax (impuesto sobre la renta or ISR) and VAT tax rates. For VAT, the rate reduces from 16% to 8% on retail sales (digital sales do not fall under the scope of the benefit) by businesses where the purchasers are located in the same area. Imports and sales from the rest of Mexico to residents located in the area are subject to the standard 16% rate.
The targeted areas are the State of Baja California, and 38 municipalities located in the northern parts within the States of Sonora, Chihuahua, Coahuila, Nuevo León y Tamaulipas.
Before implementing the reduced rate, businesses should obtain the corresponding permission from the SAT. Businesses that do not obtain permission or that do not comply with the conditions set by the law, should continue to apply the 16% rate even if they are located within the border zone. Additionally, the tax authority will conduct inspections to control the fulfillment of the necessary requirements to use the fiscal benefit.
Because of the new VAT rate, the tax authority has issued the Sixth Resolution for Modifications to the Miscellaneous Resolution 2018 establishing rules applicable to CFDIs. Consequently, taxpayers profiting from the benefits must implement the new rules impacting the content of the CFDI.
While the decree was published on the last day of 2018, the new tax benefit applies straight away from January 2019. Because of the short timescales, the tax authority has provided a grace period for implementation. Therefore, taxpayers using the tax benefit who cannot comply with the new content requirement may defer the issuance of the CFDI until April 30 2019, providing all affected CFDIs are issued by 1 May 2019. Failing to comply with these deadlines will be sanctioned as non-compliance with the obligation to issue CFDIs. Buyers receiving CFDIs from suppliers who adhere to the tax benefit rules may obtain said CFDI by the 1 of May 2019.
By Francisco de la Colina, Legal Counsel, TrustWeaver
Francisco de la Colina is a lawyer working on the regulatory team at Sovos TrustWeaver.