New tax incentives for key sectors of the exports industry have been introduced, for the fiscal years 2023, 2024 and 2025.

As part of the Mexican government’s efforts to take advantage of the nearshoring trend that has led multiple companies to relocate their activities, a presidential decree was published today in the Federal Register (Diario Oficial de la Federación), granting tax incentives to key sectors of the exports industry (the “Decree”).

The Decree is one of multiple governmental actions recently taken to make the country more attractive to multinational investors in strategic sectors that may enhance economic growth and strengthen Mexico's position in the international context.

Following please find a summary of the most important provisions of the Decree:

Target Industry Sectors

The tax incentives are directed to companies and individuals already operating in Mexico, as well as those relocating their operations to the country as part of their nearshoring strategies, engaged in the following activities:

1. The production, processing or industrial manufacturing of the following products, provided those products are exported:
   • Products for human and animal feeding.
   • Fertilizers and agrochemicals.
   • Raw materials for the pharmaceutical industry and pharmaceutical preparations.
   • Electronic components, such as simple or loaded cards, circuits, capacitors, condensers, resistors, connectors and semiconductors, coils, transformers, harnesses and modems for computers and telephones.
   • Machinery for clocks, measuring, control and navigation instruments, and electronic medical equipment.
   • Batteries, accumulators, electricity conduction cables, plugs, contacts, fuses and accessories for electrical installations.
   • Gasoline, hybrid and alternative fuel engines for automobiles, vans and trucks.
   • Electrical and electronic equipment, steering systems, suspension, brakes, transmission systems, seats, interior accessories and stamped metal parts for automobiles, vans, trucks, trains, ships and aircraft.
   • Internal combustion engines, turbines and transmissions for aircraft.
   • Non-electronic equipment and appliances for medical, dental and laboratory use, disposable materials for medical use and optical products for ophthalmic use.
2. The production of cinematographic or audiovisual works, whose content is protected by copyright under the terms of the applicable regulations, provided those works are exported; that is, the producer, as holder of the corresponding economic copyrights, shall grant a license or transfer of rights allowing the broadcasting of the relevant works abroad.

Tax Incentives

1. Accelerated Deduction of Investments.
   
   

   The eligible taxpayers may choose to apply an immediate deduction of their investments in new fixed assets acquired from October 12, 2023 to December 31, 2024, by deducting in the year in which the investment is made the amount resulting from applying to the original amount of the investment, the percentages established in the Decree, which are higher that the regular percentages established under the Income Tax Law. The deduction percentages applicable pursuant to the Decree range between 56% and 89%, depending on the type of goods involved in the relevant investment and the use given to those.

   
   

   This tax incentive is applicable only to investments in new fixed assets acquired to be used exclusively in the activities listed in the decree, excluding office furniture and equipment, automobiles propelled by internal combustion engines, automobile armoring equipment, or any fixed assets that are not individually identifiable, as well as airplanes other than those used for agricultural aerial spraying.

   
   

   Those electing to take this tax incentive shall keep a specific record of the investments for which the accelerated deduction was applied, including the supporting documentation evidencing the investments, the description of the goods subject to the deduction, the applicable deduction percentage, the fiscal year in which it was applied and the date on which the goods are transferred or lost, or otherwise cease to be useful, among other information.

   
   

   This incentive will only be applicable with respect to those investments that the relevant taxpayers maintain in use for a minimum period of two years immediately following the fiscal year in which the accelerated deduction is applied, except in the cases referred to in Article 37 of the Income Tax Law.

   
   
2. Additional Tax Deduction for Trainings.
   
   

   The eligible taxpayers may apply in the annual tax return for the fiscal years 2023, 2024 and 2025, a tax incentive consisting of an additional deduction equivalent to 25% of the increase in the expenses incurred in connection with the trainings received by each of their employees in the relevant fiscal year. Such trainings shall provide the employees technical or scientific knowledge related to the taxpayer's activity, and the employees shall be registered with the Mexican Social Security Institute.

   
   

   For these purposes, the increase will be the positive difference between the training expenses incurred in the relevant fiscal year and the average training expense incurred in the fiscal years of 2020, 2021 and 2022, even if no training expenses were incurred in such fiscal years.

   
   

   Taxpayers electing to apply this tax incentive shall keep a specific record of the trainings given to their employees, indicating the documentary evidencing supporting those training and describing the content of the training and its relationship with the economic activities for which the tax incentives are intended.

Other Relevant Provisions

In order to be eligible to receive these tax incentives, taxpayers shall meet a series of requirements (which are essentially related to compliance with tax obligations). Moreover, taxpayers intending to benefit from these tax incentives shall file a notice informing about their choice to apply the tax incentives, within the 30 days immediately following the month in which the tax incentives are applied for the first time.

Taxpayers who, after applying any of these tax incentives, fail to comply with the requirements set forth in the Decree, shall pay the corresponding taxes, along with all applicable surcharges, pursuant to the applicable legal provisions and shall cease to apply the effects of such tax incentives.

The Decree contains other provisions regulating specific situations and calculations. Moreover, the Tax Administration Service (Servicio de Administracion Tributaria) may issue the necessary general administrative rules to further regulate the due and correct application of the Decree.

The Decree may be consulted in Spanish at:

DOF - Diario Oficial de la Federación