The Federal Official Gazette (DOF per its acronym in Spanish), published on December 30th, 2020, the Decree on Tax Incentives for the Northern Border Region (Decree) modifying the document published on December 31st, 2018. The tax incentives established in such Decree consider a tax credit for Income Tax (ISR per its acronym in Spanish) equivalent to one-third of such tax (i.e., 10%), while for the Value Added Tax (VAT per its acronym in Spanish), it provides for a tax credit equivalent to 50% of such tax (i.e., 8%). It is worth mentioning that the modifications aim to limit the application of such benefits. In this sense, please find below the most relevant changes:
• The timeframe to apply the tax incentives of the Decree was extended until December 31st of 2024.
• The Decree recognizes that the tax incentive may be applied alongside other tax incentives established in Rule 11.4.15 of the Omnibus Tax Resolution for 2020 (RMF per its acronym in Spanish).
• The procedure to apply for the tax incentive was modified; the authorization request is now replaced by a notice to be filed before the tax authorities.
• Taxpayers listed in Article 69 of the Federal Tax Code are eligible to apply for the benefit only in the case of tax debt forgiveness (regarding fines only). This situation must be indicated in the registration notice.
• Certain assumptions were added or modified to apply for the tax incentive; the relevant changes are:
o The collaboration period for the verification program is extended from biannual to annual.
o It would be mandatory not to have a restriction or a cancellation in the use of digital stamps to be subject to these benefits.
• The Decree also includes cases in which the tax authorities (SAT per its acronym in Spanish) may cancel the registration when: (i) the taxpayer requests the cancellation of the tax incentive; (ii) or when the Decree is not applicable due to the taxpayer’s specific circumstances, (i.e., financial institutions, taxpayers paying taxes under the optional regime for groups of companies, entities that carry out primary activities, fiscal incorporation groups, among others, as established in Article 6 of the Decree).
Value Added Tax
• Acts or activities corresponding to the sale and granting of the temporary use or enjoyment of intangible goods are integrated into the VAT incentive restrictions, as well as the provision of transportation services of goods or people, except those that begin and end in border region without stopovers outside it.
Based on the above in J.A. del Rio we will be glad to assist you in reviewing the application of this Decree and any modification applicable to your company.