Flash: Decree for taxpayers who carry out economic activities in the Isthmus of Tehuantepec

On June 5, 2023, the Decree promoting investment by taxpayers who carry out productive economic activities within the Development Poles for the Welfare of the Isthmus of Tehuantepec was published in the Official Gazette of the Federation (DOF, by its acronym in Spanish), which will enter into force the day after its publication.  which grants tax benefits and administrative facilities.

As background to the Decree, the National Development Plan 2019-2024 establishes the Program for the Development of the Isthmus of Tehuantepec, whose objective is to boost the growth of the regional economy, and indicates that its axis will be the Interoceanic Multimodal Corridor, which will take advantage of the position of the Isthmus of Tehuantepec to compete with world markets for the mobilization of goods, through the combined use of various means of transport.

Subsequently, on March 2, 2020, the Organic Statute of the Interoceanic Corridor of the Isthmus of Tehuantepec was published in the DOF, in which the Development Poles for Welfare (hereinafter PDB) are described as polygons within the Isthmus of Tehuantepec that will have incentives to attract investment that detonates the economic and social development of the region.  based on the productive vocations of greater potential.

Additionally, on May 12, 2023, the declarations of the PDBs: Coatzacoalcos I, Coatzacoalcos II, Salina Cruz, San Blas Atempa, San Juan Evangelista and Texistepec were published in the DOF.

The taxpayers who may apply the benefits established in the Decree are natural and legal persons resident in Mexico, as well as residents abroad with permanent establishment in the country, who are taxed as legal persons of the general regime, natural persons with business and professional activities, and legal persons of the simplified regime of trust,  provided that they carry out productive economic activities within the PDB in accordance with the declaration issued by the decentralized public agency Interoceanic Corridor of the Isthmus of Tehuantepec.

The main tax benefits contemplated by the Decree are:

• A tax credit equivalent to 100% of the Income Tax (ISR, by its acronym in Spanish) caused in the fiscal year in question, for taxpayers who obtain income from productive economic activities carried out within the PDB, during the first three fiscal years
• Subsequently, the tax credit will be 50% of the ISR in the three subsequent years, or up to 90% in case the minimum employment levels that will be established in the guidelines issued for this purpose by the Ministry of Finance and Public Credit (SHCP, by its acronym in Spanish) are exceeded
• A tax credit equivalent to 100% of the Value Added Tax (VAT) to be paid by taxpayers who carry out within the PDB the alienation of goods, the provision of independent services or the granting of the use or temporary enjoyment of goods, to persons who carry out productive economic activities within the PDB, provided that no amount is transferred to the purchaser of the goods or services for VAT,  and as long as the goods, services or the temporary use or enjoyment of goods are used and exploited by the purchasers in the performance of their productive activities within the PDBs. The tax credit can be applied for four years from the entry into force of the Decree
• Make the immediate deduction of 100% of the original amount of the investment of new fixed assets that they use in the PDB to carry out their productive economic activities, applicable during the first six fiscal years. It is not applicable for office furniture and equipment, automobiles, automobile armoring equipment or any fixed asset property not individually identifiable
• Do not consider the aforementioned fiscal incentives as cumulative income for income tax purposes

The requirements for the application of tax benefits and administrative facilities are as follows:

• Be up to date in the fulfillment of their tax obligations.
• Have a valid concession title or own any surface within a PDB.
  
• Present, where appropriate, the investment project for which the concession title was granted.
  
• Have their tax domicile in the PDB where they develop their productive economic activities.
  
• To maintain the benefits, progress must be made in the investment project and comply with the minimum levels of employment determined by the SHCP in accordance with the provisions of said project and in accordance with the economic activity they develop.

The SHCP must issue a certificate that proves compliance with the requirements, or the resolution of non-compliance with them, as well as publish on its website and update every six months the list of taxpayers who carry out productive economic activities within the PDB to which it has issued the certificate.

Productive activities within the PDBs, according to the allocation made to each of them, are understood to mean the following vocations:

1. Electrical and electronic
2. Semiconductor
3. Automotive (electromobility)
4. Auto parts and transportation equipment
5. Medical devices
6. Pharmacist
7. Agroindustry
8. Equipment for the generation and distribution of electrical energy (clean energy)
9. Machinery and equipment
10. Information and communication technologies
11. Metals and petrochemicals
12. Any other not included above determined by the Governing Board of the Interoceanic Corridor of the Isthmus of Tehuantepec for the PDB

Those who intend to apply the benefits of the Decree on income tax may not jointly apply the following:

• The benefits for companies with maquila operations
• The optional regime for groups of companies
• The tax incentive for trusts dedicated to the acquisition or construction of real estate
• Fiscal incentives for national film and theatrical production and distribution
• The fiscal stimulus to the research and development of technology of the ISR Law
• The fiscal stimulus to high-performance sport

The Decree states that the tax authorities will issue the necessary rules for its proper and correct application, so it will be necessary to be attentive to its issuance.

As always, the staff of  KPMG's Tax and Legal practice in  Mexico is at your service to analyze in detail the effects that the application of these provisions may have on your company.