Mexico announces new tax incentives for investors in the Interoceanic Corridor
The Mexican government recently announced new tax incentives to encourage businesses to establish operations and create jobs in the Interoceanic Corridor development region. Who qualifies, and how?
Officially known as the Development Poles of the Interoceanic Corridor of the Tehuantepec Isthmus (DPICTI), the new development region backed by the Mexican government is being positioned as an overland alternative to the Panama Canal. The goal is to attract private investment in a new logistics hub in the isthmus, Mexico's narrowest point, that connects ports on the Pacific and Gulf coasts.
The project aims to modernise infrastructure including railways, roads, bridges and ports in Veracruz and Oaxaca, as well as establish 10 new industrial parks. Railway connections to Guatemala will also be upgraded, opening up new opportunities for trade with Central and South America.
To encourage economic growth and job creation through private investment in the region, the Mexican government has announced a range of tax benefits for investors.
To accessing these benefits, companies must first obtain the concession titles for land located in the DPICTI through public bids being launched by the federal government. The tax benefits will be granted under a simplified trust regime for corporations and businesspeople, either resident in Mexico or overseas, with a permanent establishment that generates income from the following eligible economic activities:
- electrical and electronics
- automotive (electromobility)
- auto parts and transportation equipment
- medical devices
- electric power generation and distribution equipment (clean energy)
- machinery and equipment
- information and communication technologies
- metals and petrochemicals
To qualify for these tax benefits, taxpayers must meet certain criteria and follow strict guidelines from the Ministry of Finance and Public Credit (SHCP). These include fulfilling tax obligations punctually, owning a valid concession title or a plot of land within the DPICTI, submitting an investment project for which the concession title was awarded, and having a tax address within the DPICTI where the eligible business is carried out.
Taxpayers who qualify for the DPICTI programme may be eligible for income credits. The credits are calculated based on the income generated from economic activities within the programme, accounting for necessary deductions. During the first three fiscal years after obtaining a compliance certificate from the SHCP, taxpayers can receive a 100% tax credit on their income tax. For the following three years, the credit will range from 50% to 90% depending on minimum employment levels as outlined in SHCP guidelines.
Eligible taxpayers may also make an immediate deduction of 100% of the original amount of the investment of new fixed assets used in the DPICTI during the first six years after obtaining the certificate of compliance. This is instead of applying the maximum percentages authorised under Mexico’s income tax laws.
Effective 6 June 2023, businesses involved in productive economic activities located within the DPICTI are eligible for a 100% VAT credit on the sale of goods, independent services or temporary use of goods to other companies operating within the same region. This policy will be in effect for a period of four years.
Taxpayers applying for the income tax credit and immediate deduction benefits will be subject to certain limitations when applying for other tax benefits.
The Interoceanic Corridor is expected to see an influx of investment and company relocation due to the new tax incentives, including businesses looking to nearshore their activities to Mexico.
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