GLOBAL INDIRECT TAX. Mexico. Country VAT/GST Essentials. kpmg.com TAX

Transcription

1 GLOBAL INDIRECT TAX Mexico Country VAT/GST Essentials kpmg.com TAX

2 b Mexico: Country VAT/GST Essentials

3 Mexico: Country VAT/GST Essentials Contents Scope and Rates 2 What supplies are liable to VAT? 2 What is the standard rate of VAT? 2 Are there any reduced rates, zero rates, or exemptions? 2 Registration 5 Who is required to register for Mexican VAT? 5 Are there penalties for not registering or late registration? 5 Are there any simplifications that could avoid the need for an overseas company to register for VAT? 5 VAT Grouping 5 Is VAT grouping possible? 5 Can an overseas company be included in a VAT group? 5 Returns 5 How frequently are VAT returns submitted? 5 Are there any other returns that need to be submitted? 5 VAT Recovery 6 Can I recover VAT if I am not registered? 6 Does your country apply reciprocity rules for reclaims submitted by non-established businesses? 6 Are there any items that you cannot recover VAT on? 6 Invoices 8 What do I have to show on a tax invoice? 8 Can I issue invoices electronically? 8 Is it possible to operate self-billing? 8 Transfers of Business 9 Is there a relief from VAT for the sale of a business as a going concern? 9 Options to Tax 9 Are there any options to tax transactions? 9 Head Office and Branch Transactions 9 How are transactions between head office and branch treated? 9 Bad Debt 9 Am I able to claim relief for bad debts? 9 Anti-Avoidance 9 Is there a general anti-avoidance provision under VAT law? 9 Penalty Regime 9 What is the penalty and interest regime like? 9 International Supplies of Goods and Services 6 How are exports of goods and services treated? 6 How are goods dealt with on importation? 7 How are services which are brought in from abroad treated for VAT purposes? 7 All information reflected in this document was obtained/summarized from KPMG in Mexico as of October 2011.

4 2 Mexico: Country VAT/GST Essentials Scope and Rates What supplies are liable to VAT? The Mexican Value-added Tax Law (LIVA) establishes that VAT is due on the following activities carried out in the Mexican territory: sales rendering of independent services imports of goods or services leasing. What is the standard rate of VAT? The standard rate of VAT is 16 percent. Are there any reduced rates, zero rates, or exemptions? Yes. When the acts or activities on which VAT is payable are performed by residents of the frontier region (defined as 20 kilometers parallel to the northern and southern international divisions of Mexico, as well as all the territory of the states of Baja California, Baja California Sur, Quintana Roo, the municipalities of Caborca, Cananea, Sonora, and additionally some parts of the state of Sonora) and material delivery of the assets or rendering of the services takes place therein, the tax shall be computed by applying a rate of 11 percent. There is a zero-percent VAT rate for exports (see section International Supplies of Goods and Services) and for the alienation of certain goods, generally including: non-industrialized animals and vegetables, except rubber patent medicines and products intended for food, except the following: beverages other than milk syrups or concentrates for preparation of beverages caviar, smoked salmon, and baby eels flavoring agents, microcapsules, and food additives. ice and non-gaseous and non-compounded water, except if bottled in less than 10 liter recipients tractors for operating farm equipment fertilizers, pesticides, herbicides, and fungicides used in agriculture or cattle breeding activities hydroponic greenhouses and equipment integrated thereto gold, jewelry, gold metalwork, artistic, and ornamental pieces, and ingots (80 percent content) when traded as wholesales books, magazines, and newspapers published by the taxpayer.

5 Mexico: Country VAT/GST Essentials 3 The rendering of the following independent services are zero-rated: services rendered directly to farmers and cattle breeders corn or wheat milling or grinding milk pasteurization services rendered in hydroponic greenhouses cotton ginning slaughter of cattle or poultry reinsurance supplies of water for domestic use. Also, the temporary use or enjoyment of the following equipment or machinery: Exempt activities include, amongst others: Sales of goods land residential real property constructions books, newspapers, and magazines under certain conditions used personal property, unless transferred by enterprises lotteries and raffles tickets currency, gold and silver pieces that formerly were currency and troy ounces partnership interests, documents pending collection, and negotiable instruments, if some requirements are met. tractors for operating farm equipment hydroponic greenhouses and its integrated equipment. The export of certain goods or services is also taxed at a 0 percent VAT rate.

6 4 Mexico: Country VAT/GST Essentials Services mortgage commissions commissions charged by managers of retirement funds services rendered for free teaching services for authorized private or government establishments public land transport of persons, except by railway international maritime transport of goods certain insurances certain interests derivate operations services rendered to their members as normal compensation for their quotas, provided that such services relate exclusively to purposes appropriate for political parties, labor unions, etc. public shows. This does not include shows in restaurants, bars, cabarets, dinner, ballrooms, or nightclubs professional medical services authors royalties. Leasing residential property properties used for agricultural or animal breeding purposes tangible goods which use or enjoyment is granted by foreign residents for which tax was paid upon importation. Imports temporary imports in terms of the Customs Law goods donated by foreign residents to the federal government imports of goods or services that if were domestic transactions would be exempt of VAT or zero-rated transactions certain works of art vehicles in compliance with some conditions and requirements.

7 Mexico: Country VAT/GST Essentials 5 Registration Who is required to register for Mexican VAT? Mexican Entities All individuals and entities engaging in Mexico in acts or activities consisting of alienation of assets, rendering of independent services, granting of temporary use, or advantage of assets and import of goods or services must register for VAT purposes. Non-Mexican Entities Non-Mexican entities that have established a Mexican permanent establishment, for income tax purposes, have the obligation to register before the Mexican tax authorities; consequently, they are compelled to comply with all Mexican tax obligations, including VAT obligations. VAT Grouping Is VAT grouping possible? No. Can an overseas company be included in a VAT group? Not applicable. Returns How frequently are VAT returns submitted? Entities are required to submit VAT returns on a monthly basis (final returns). Tax must be paid at the latest by the 17th day of the month following that in which the payment is due. Are there penalties for not registering or late registration? Failure to register for tax obligations will lead to a penalty ranging between USD209 and USD629. Please note that there is a penalty ranging from three months to three years of prison in the event of an omission to request the tax registration for more than one year from the date the registration should have been requested. Are there any simplifications that could avoid the need for an overseas company to register for VAT? No. Are there any other returns that need to be submitted? In addition to monthly VAT returns, taxpayers are obliged to submit an annual summary VAT return at the end of the year along with the annual income tax return. It is also mandatory to file an information return on a monthly basis by the 17th day of the following month, supplying information on all persons from whom VAT was withheld in the preceding month. This information must be provided to the tax authorities through the electronic means and forms established by the tax authorities. Also, a monthly information return for operations with suppliers must be filed by the 17th day of the following month. Please note that filing the monthly information return for operations with suppliers exempts the taxpayer from having to submit the annual summary VAT return.

8 6 Mexico: Country VAT/GST Essentials VAT Recovery Can I recover VAT if I am not registered? No. Does your country apply reciprocity rules for reclaims submitted by non-established businesses? In the case of Mexico, the reciprocity rules are not applicable for VAT purposes. Are there any items that you cannot recover VAT on? Entities that exclusively perform exempt activities are not entitled to recover input VAT. In addition, certain types of import and certain types of supplies of goods and services listed in the VAT law do not entitle taxpayers to an input tax credit (see section Scope and Rates). International Supplies of Goods and Services How are exports of goods and services treated? Entities residing in Mexico shall compute the tax by applying the rate of 0 percent to the alienation value of assets or services rendered, when they are exported. For VAT law purposes, exports of goods or services comprise of: Definitive exportations in terms of the customs law. Alienation of intangible assets by a person residing in Mexico to a person residing abroad. Temporary use or benefit obtained in a foreign country of intangible assets furnished by a person residing in Mexico. Advantage taken abroad of services rendered by a person residing in Mexico for the following services: Technical assistance, technical services related therewith, or information relative to industrial, commercial, or scientific experience. Maquila and submaquila operations for export in terms of the customs legislation and of the Decree for the Fostering and Operation of the Maquiladora Industry for Export. For said purposes, the services shall be deemed to be taken advantage of abroad when the assets of such operations are exported by the maquiladora company. Advertising. Commissions and intermediations. Insurance, reinsurance, bonding, and re-bonding. Financing operations. Filming or recording. Call center services for calls originating abroad, contracted and paid by a nonresident without a permanent establishment in Mexico.

9 Mexico: Country VAT/GST Essentials 7 International transport services of goods rendered by persons residing in this country, and services of loading, unloading, lighter age, warehousing, custody, cargo handling, and port installations for the export of merchandise. Aerial transport of residents of this country, deemed rendered outside Mexican territory. Rendering of hotel and related services by hotel companies to foreign tourists entering this country for the sole purpose of participating in congresses, conventions, exhibitions, or fairs to be held in Mexico, provided that said individuals provide evidence of country of residence in terms of the General Population Act and pay for such services with credit cards issued abroad, and that the contracting of such hotel and related services was performed by the organizers of the event. In general terms, the aforementioned are considered exported when they are hired and paid for by a foreign resident without a permanent establishment in Mexico. Some additional requirements may apply. How are goods dealt with on importation? When goods are imported into Mexico, import VAT and customs duty may be due. These have to be paid or secured before the goods can be released from customs control. Following the importation of tangible goods, the taxpayer has the right to credit the VAT paid on the import of the aforementioned goods in the tax return of the same period. How are services which are brought in from abroad treated for VAT purposes? If you contract services from outside Mexico, this will be considered as service importation and will be subject to VAT on import, only if the services are rendered by a nonresident entity. It is important to mention that a credit for the corresponding amount is granted in the same monthly return and hence, no cash flow effects should derive there from (virtual VAT), unless this service is not identified with a taxable activity and the taxpayer carries out taxable and exempt activities. International transportation is not considered in the importation of a service. The acquisition of intangible assets by persons residing in Mexico from persons who do not reside in national territory and the temporary use or benefit taken in national territory of intangible assets furnished by persons who do not reside in Mexico will be considered as an importation and will be subject to VAT. Likewise, it is important to mention that the Mexican VAT regulation allows taxpayers who incurred VAT on the importation of intangible assets to credit an equal amount in the same month; therefore importations of intangible assets should not have economic consequence for Mexican VAT purposes (virtual VAT).

10 8 Mexico: Country VAT/GST Essentials Invoices What do I have to show on a tax invoice? Please note that Mexican taxpayers must have their invoices printed by authorized printers. If you have to issue a tax invoice it should contain the following data: name, legal denomination or business name, business address, and supplier tax identification number a sequential invoice number date and place of issue customer tax identification number quantity and class of the merchandise or service description the number of units delivered and the price per unit as well the amount of the taxes to be transferred number and date of the custom documents, as well as the name of the custom in which the import was made date of impression and identification number of the authorized printer explicit and separated reference of the transferred VAT reference to the payment, if it is made in one or several exhibitions reproduction of the tax identification document the VAT rate should be expressed in the invoice. Can I issue invoices electronically? As of January 1, 2011 entrepreneurs which annual turnover is more than MXN4,000,000 are obliged to issue electronic invoices when the amount of the invoice (before taxes) is higher than MXN2,000. Please note that a digital stamp should be obtained by a third party (supplier of certification services) by electronic means from the Mexican tax authorities web page for each electronic invoice. The implementation of this electronic invoicing system requires the following pre-conditions to the taxpayers: 1) Having an advanced electronic signature and the certificate on which it is based on; 2) Having a certificate for digital stamping; 3) Contracting a Third party supplier of Certification services. Is it possible to operate self-billing? No. The rule that allowed self- billing (paper invoices) was abrogated. Taxpayers were able to bill by themselves up to April 2009 with the corresponding authorization given by the tax authorities.

11 Mexico: Country VAT/GST Essentials 9 Transfers of Business Is there a relief from VAT for the sale of a business as a going concern? No. Options to Tax Are there any options to tax transactions? No. Head Office and Branch Transactions How are transactions between head office and branch treated? The transactions between head office and branch are treated as a normal operation between two independent entities that is subject to Mexican VAT. Bad Debt Am I able to claim relief for bad debts? No, Mexican legislation does not contemplate the claims of VAT for bad debts. The Mexican VAT scheme recognizes the tax payable and deductible on an actual payment or collection basis. Anti-Avoidance Is there a general anti-avoidance provision under VAT law? No. Penalty Regime What is the penalty and interest regime like? There are certain penalties for failing to fulfill formal obligations. The penalties for failure to register or late registration have already been addressed above. When the VAT payment is partial or totally omitted, the penalties applicable are as follows: There are no penalties applicable if taxpayers pay spontaneously; meaning that they pay prior to the start date of an audit by the Mexican tax authorities. Twenty percent of the omitted contributions, if the taxpayer pays the amount, along with inflation adjustments and interest surcharges, before being notified by the authorities of a final resolution but after audit has begun. Thirty percent of the omitted contributions, if the taxpayer pays the amount, along with inflation adjustments and interest surcharges, after being notified by the authorities of the final resolution. Fifty-five percent to seventy five percent of the omitted tax amount in other cases VAT taxpayers who fail to pay VAT due are obliged to pay interest accrued and recognition of inflation from the last day of the voluntary payment period until the day in which the payment is effectively made based on the published national consumer price index. The interest rate is 1.13 percent per month since 2004 up to date (previous years from 1 percent to 2.5 percent approximately).

12 The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation KPMG International Cooperative ( KPMG International ), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. Designed by Evalueserve. Publication name: Mexico Country VAT/GST Essentials Publication number: Publication date: January 2012