Mexico’s asset tax has been repealed and replaced by a flat tax that starts at 16.5 percent in 2008 and increases to 17.5 percent in 2010.

      The changes are part of a tax reform signed into law in September. Among other things, it introduces the Impuesto Empresarial a Tasa Unica, or IETU, a flat tax that acts as an alternative minimum tax. The tax is effective Jan. 1, 2008 and applies to individuals and corporations, as well as permanent establishments of foreign companies doing business in Mexico.

      The tax rate is 16.5 percent in 2008, 17 percent in 2009 and 17.5 percent in 2010. The IETU tax base will be larger than the tax base used for computing the regular Mexican tax liability, and taxpayer’s will be liable for the larger tax of the two. The IETU will not be a creditable tax for U.S. tax purposes.

      The reform is an attempt to wean Mexico of its dependence on oil revenue and more evenly distribute the tax burden among businesses. The reform is predicted to yield revenues of around ps. 120 billion in 2008, an amount equivalent to 1.3 percent of GDP.

      About 30 percent of the resources obtained from the reform will be allocated to federal entities and 70 percent to the federation, not counting the resources from gasoline taxes.

      Resources obtained from the reform will be allocated to social expenditures and infrastructure investment, at the same time they will strengthen the public finances of the three levels of government and will reduce the government’s dependence on oil revenues.

      According to international accounting firm KPMG, all income, any other amount that may be collected, including advances, received deposits, taxes and fees, interest and contractual penalties, is regarded as...

...Continued in the pages of Twin Plant News, Subscribe Today!