Input VAT may no longer be creditable for activities performed outside Mexico

Action required by March 10

From 1 January 2022, taxpayers may no longer be able to claim credit for input value-added tax (VAT) for activities performed outside of Mexico. Taxpayers that wish to file an Amparo lawsuit challenging this new rule must do so by March 10.

The Mexican tax reform, which came into force on January 1, 2022, includes a broad definition about “non-VATable activities,” requiring taxpayers to consider these activities when determining whether input VAT should be creditable. This definition/provision is significant and will affect businesses that are VAT registered in Mexico and incur VAT on costs in Mexico, but perform activities (e.g., sell goods or provide services) outside of Mexico.

The new law is likely to affect some supply chains, including manufacturing, mining and aviation to name a few.

Source EY

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