VAT Implications for Nearshoring in Mexico: Recent Rulings and Controversies Explained

• On October 5th, 2023, the Central-North Regional Chamber of the Administrative Justice Court established a criterion stating no VAT withholding obligation exists on imported goods sold by a foreign resident without a permanent establishment in Mexico.
• Tax and customs authorities reacted by asserting their position against non-withholding of VAT, causing uncertainty for importers.
• Rule 3.8.4. in the Fifth Amendments Resolution to the General Administrative Guidelines in Foreign Trade Rules for 2010 included the obligation for Mexican companies to withhold VAT from foreign residents selling goods in Mexico.
• The Rule has undergone changes in subsequent years, with substantial modifications in 2023 and 2024 causing controversy and multiple interpretations.
• The Central-North Region Chamber of the Administrative Justice Court ruled that the obligation to withhold VAT on imported goods sold by foreign residents without a permanent establishment in Mexico is not applicable.
• Despite the ruling, tax and customs authorities continue to oppose it, considering non-withholding of VAT as an improper practice and adding it as a cause for suspension in the Importers Registry.

Source: sanchezdevanny.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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