Maquiladora Program in Mexico
Maquiladora Operations
The maquiladora industry has long been integral to Mexico and US trade. Maquiladoras in Mexico are set up to import materials for processing into a final product to be exported. Maquiladoras historically benefited from significant tax preferences, including permanent establishment protection, transfer pricing simplification, and tax rate reduction. In addition, materials imported and goods exported by maquiladoras were effectively exempt from the value-added tax.
The new 2014 tax law significantly impacts maquiladora operations in the following ways:
- Restrictions are placed on the types of activities maquiladoras can undertake within Mexico and the source of assets used in performing its activities.
- Materials imported by the maquiladoras are now subject to a 16% value-added tax. The tax can only be refunded upon the export of the finished goods. Companies will need to plan for the cash flow impact of this new law.
- Maquiladoras are limited to the safe harbor transfer pricing unless there is an Advanced Pricing Agreement (APA) in place. The safe harbor method will require the maquiladoras to have taxable income equal to the greater of the cost plus 6.5% or 6.9% of net asset value.
Shelter maquiladora operations will potentially be determined to be a permanent establishment of the foreign owner.
Companies with maquiladora operations should carefully review the impact of the tax reform and evaluate whether revisions to entity structure, relevant contracts, or operations are warranted.
Whether you seek to expand your business:
- Establishing a wholly-owned operation
- Joining a special, co-operative production relationship, known as a “shelter”, that is designed for smaller operations
- Sourcing end items from qualified Mexican manufacturers
- Developing a joint venture with an appropriate Mexican company
- Acquiring an existing Mexican company or facility.
Our experienced experts can help with:
- International Tax Services
- Transfer Pricing Studies
- Advance Pricing Agreements
- Due diligence, entry and exit strategy, and financing
- Entity structure decisions to optimize your global tax situation
- Technology assessment and selection
“We depended on the experience and expertise of the Cuevas & Cuevas global services team to help us weigh our international options. Now they are helping us implement our plans. They are as committed to our success as any of our international team members.”
- Austin Clark, Vice-President
International Operations
Whether you are an American business looking for opportunities abroad, or a globally-based business looking for opportunities in-bound to the U.S., our international business experts offer comprehensive services to help you make keen decisions. implement your plans, and find success. We have very well developed international service teams with specific country expertise specializing in Accounting and Audit, Tax, and a plethora of Consulting Services.
With our market entry services, whether in-bound to the U.S. or establishing operations globally, clients benefit from the most current thinking and firm-wide international experience. Our team of international experts takes a practical approach to finding the right solution for you. We offer a one-stop-shop of extensive resources vis-à-vis our International Concierge service, a Cuevas & Cuevas proprietary approach to international client service. You can be sure that you have the best technical resources available and at your disposal. The right resource at the right time right when (and where) you need it.