Following the July announcement by the Mexican Tax Authorities (SAT) about the renewal of the Qualified Maquiladora Approach (QMA) agreement with the U.S. Internal Revenue Service (IRS), the IRS published additional details on its website on September 18.

The aforementioned represents a significant development for U.S. taxpayers involved in contract manufacturing through a Mexican Maquiladora:

- By extending the application of the QMA for fiscal years 2020 to 2024 and 

- Allowing U.S. taxpayers to avoid double taxation on the contract manufacturing and assembly functions performed by the maquiladoras

- If the Mexican taxpayers entered into a unilateral advance pricing agreement (APA) with the SAT’s Large Taxpayer Division (Administración General de Grandes Contribuyentes) under terms negotiated in advance between the competent authorities.

The Renewal Agreement maintains the core elements of the 2020 QMA's transfer pricing framework, providing additional details regarding the application of the agreed methodologies, and further addresses instances in which the maquiladora has an outstanding accounts receivable balance to ensure that the QMA framework continues to produce arm’s length results.

More than 700 U.S. taxpayers with maquiladoras in Mexico are expected to qualify for the application of the renewed QMA, thus strengthening ties between the IRS and SAT and providing certainty to hundreds of multinational groups.

Accordingly, we will remain alert regarding any instructions from the tax authorities concerning the filing of APAs related to the application of the methodology, as well as the filing of amended annual tax returns.  

When necessary, we will also provide follow-up to adjustments to the maquiladora’s taxable income resulting from this methodology, which may lead to the following: 

• Additional Income Tax payments, including inflation adjustments and surcharges,

• Adjustments to the taxable income and tax profit margin, if applicable.

• An increase in taxable income leading to additional Profit Sharing to Employees (PTU), and guidance on how the workers should be compensated.

We invite you to check out the following link in order to learn more about this publication. 

https://www.irs.gov/businesses/renewal-of-the-qualified-maquiladora-approach-agreement 

To know more about the Maquila regime in Mexico, check out our webinar “Charting the Tax Future Maquiladoras in Mexico 2025”:

https://www.youtube.com/

J.A. DEL RÍO offers a wide array of specialized consulting services to assist you with these and other matters, in order to ensure that your project complies with the applicable characteristics  contained in this agreement.

If you have any questions, J.A. DEL RÍO can provide you with our experts to advise in matters concerning compliance with your legal and tax obligations. Once again, please let us know if we may be of any further assistance to you at: contacto@jadelrio.com