Doing Business In (Insert Country Name Here) - Department of ...

ecame effective could apply for cancellation of prior commitments. Foreign investorswho failed to apply for the revocation of existing performance requirements remainedsubject to them.The Mexican federal government has eliminated direct tax incentives, with the exceptionof accelerated depreciation. A fiscal reform package was passed in September 2007 thatincludes a Flat Rate Corporate Tax (IETU). This tax limits the deductions thatcompanies are allowed, though changes made at the behest of the business communitystill allow some credits for previous inventories and investments, as well as forcompanies that fall under the maquiladora scheme. In 2009, the IETU will increase from16.5% to 17%, and to 17.5% in 2010. Investors should follow IETU developmentsclosely.In 2009, the Mexican Congress raised the general value added tax (IVA) from 15 to 16percent, or from 10 to 11 percent at the border. The income tax (ISR) increased to 30percent, and will fall to 29 percent in 2013, and to 28 percent in 2014. In addition,companies that deferred tax payments as part of their consolidation strategy will have toannually calculate the tax on benefits obtained in consolidation after five years. Theactual payment will then be made in the following terms: 25 percent in the following year(year 6) and then four payments of 25, 20, 15 and 15 percent in each of the years 7,8,9and 10.Most taxes in Mexico are federal; therefore, states have limited opportunity to offer taxincentives. However, Mexican states have begun competing aggressively with eachother for investments, and most have development programs for attracting industry.These include reduced price (or even free) real estate, employee training programs, andreductions of the 2 percent state payroll tax, as well as real estate, land transfer, anddeed registration taxes, and even new infrastructure, such as roads. Four northernstates -- Nuevo Leon, Coahuila, Chihuahua and Tamaulipas -- have signed anagreement with the state of Texas to facilitate regional economic development andintegration. Investors should consult the Finance, Economy, and EnvironmentSecretariats, as well as state development agencies, for more information on fiscalincentives. Tax attorneys and industrial real estate firms can also be good sources ofinformation.U.S. Consulates have reported that the states in their consular districts have had tomodify their incentive packages due to government decentralization. Many states havealso developed unique industrial development policies. Sonora, for example, is workingto expand the free entry area for tourists (south from the border to the port of Guaymas.)Sonora is one state that has implemented long-term agriculture and infrastructuredevelopment plans. The government of Yucatan provides information and support topotential investors and business entrepreneurs through several programs that targetdifferent industries such as technology, agroindustry and energy exploration. Severalstates are competing to attract manufacturing in the aerospace industry.A government-owned development bank, Nacional Financiera, S.A. (www.nafin.com),provides loans to companies in priority development areas and industries. It is active inpromoting joint Mexican-foreign ventures for the production of capital goods. NacionalFinanciera offers preferential, fixed-rated financing for the following types of activities:small and medium businesses; environmental improvements; studies and consultingassistance; technological development; infrastructure; modernization; and capital