Mexico | Tax incentives for key exporting industries

Summary

On October 11, the Mexican government published in the Official Gazette (DOF) a decree granting tax incentives to key sectors of the export industry such as the immediate deduction of the investment in new fixed assets and additional deductions of labor training expenses.

Key points

• Key points:
• The tax incentives include deductions ranging from 56% to 89% in fixed assets investments and additonal deductions on labor training expenses across 10 key sectors.
• 6 out of the 10 benefited sectors are among the most competitive industries according to the revealed comparative advantage (RCA) index.
• The tax incentives could have adverse effects such as lower tax revenue, unfair competition by the beneficiary sectors or violate the USMCA by discriminating between sectors.
• East Asian countries have also used in the past fiscal incentives to attract FDI, which allowed them to achieve high economic growth rates.
• The measure is positive for attracting FDI, however it should be accompanied by infrastructure development to tackle nearshoring obstacles, mainly energy supply constraints

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