New Mexican Tax Reform Impacts Small Business

The most recent tax reform laws in Mexico have raised the business tax rate from eleven to sixteen percent.  Changes have also been made to the type of accounting that small businesses will have to provide for goods and services.  Business checking accounts at a Mexican bank will now be required.  We can expect to see increases in prices and/or reductions in staff and facilities in the businesses that serve those of us living here on the Baja.

For a detailed summary, please see our Mexican News page.

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Posted on January 7, 2014, in News. Bookmark the permalink. 2 Comments.

  1. The tax that’s increasing from 11% to 16% is the IVA (VAT), which is similar to a sales tax, not a “business tax rate”. Businesses can reclaim any IVA they pay, so doesn’t affect their costs.

    It’ll add a few percent to the price for the end customer, for the items that are taxed (most groceries are not taxable). This just brings us to the same sales tax rate as the (often much poorer) other parts of Mexico.

    Nobody likes an increase in taxes, but this one seems fair (the border areas are no longer poor). It should have very little if any effect on the costs of running a business. The abolition of the IETU flat-rate business tax, and the cash deposit tax, might even reduce costs for some businesses (although I agree there will be even more paperwork needed).

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    • Thank you, Robert, for providing the specifics on the tax change. As you pointed out, end users may see an increase in prices. And, those of us on this blog are, for the most part, “end users.” I don’t think anyone is complaining about the tax increase. I think our concern is whether or not some of the businesses we rely on will wish to cope with the additional burdens the extra paperwork will require. I guess all of this is left to be seen.

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