Mexico tax: 2010 Mexico tax changes approved

The Mexican Congress has approved the Federal Revenue Law and a number of changes to the tax law for fiscal year 2010. The new measures, approved on 31 October 2009 and which generally are the same as those proposed in September, still must be published in the Official Gazette to be enacted as law.

The main changes are as follows:

- The corporate and individual (maximum rate) income tax rates will be increased temporarily from 28% to 30% for the years 2010-2012. The rate will decrease to 29% in 2013 and revert back to the current 28% in 2014.

- Significant changes will be made to the income tax consolidation system to limit the deferral of taxes. Although qualifying taxpayers will still be allowed to offset losses against profits of other entities within a consolidated group and to distribute dividends tax free between group members, the effects should be reversed after the fifth year and on installments. There are a number of inconsistencies in the process to determine the deferred tax on consolidation that may result in some groups calculating an amount to be paid that is significantly higher than the tax that was deferred.

- For fiscal year 2010, it will no longer be possible to apply the flat tax loss credit against income tax due in the same fiscal year.

- The VAT rate will be increased by 1%, to 16% and 11% in the border areas.

- The tax on cash deposits, which currently applies to monthly deposits exceeding MXN 25,000 or the equivalent in a foreign currency, will be increased from 2% to 3%, and the limit of the exemption will be decreased to MXN 15,000.

- A 3% excise tax will be levied on telecommunications services, with some exceptions (e.g. internet services, local phone services).

- Excise tax rates or payments on alcoholic beverages, cigarettes and gambling were increased.

- Beginning in 2011, most invoices will be required to be issued electronically.