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The word Maquiladora has become synonymous with manufacturing companies who produce primarily in the Mexico border region to take advantage of the low cost labor in close proximity to the United States markets. There are several other terms associated with manufacturing in Mexico. Among them are IMMEX, production sharing, co-production sharing, off-shoring, shelter services, off-shore manufacturing, twin plants and In-Bond.

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What is an IMMEX?

On November 1st, 2006 the Mexican Federal Government published the Maquila and Export Service Program (IMMEX Decree), with the objective of increasing the competitiveness of Mexico’s export sector. The IMMEX Program is a benefit that foreign manufacturers can apply for, which allows the temporary importation of materials that are used in an industrial process or service. Manufacturers in Mexico under the IMMEX program produce, transform, repair or package foreign goods imported temporarily for subsequent export, without the need for payment of import tax, countervailing duties and value added tax, if certified.

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VAT Certification

In late 2013, the Mexican legislature passed a tax reform eliminating the exemption of Value Added Tax (VAT) for temporary imports previously available to maquiladora companies operating as an IMMEX. The change resulted in a 16 percent VAT for all imports, regardless of the location of the manufacturing facility within Mexico.

After political push back from the maquiladora industry the Mexican government issued a decree granting maquiladora companies tax benefits in order to mitigate some of the effects of the 2013 tax reform. A certification framework was put in place to immediately credit VAT for temporary raw material and machinery imported to Mexico. Companies that demonstrate the required level of compliance in trade and tax matters are eligible for certification by the Mexican tax authorities. The VAT certification is available in three tiers, A, AA, and AAA, each providing a higher level of benefit with an increased number of requirements. Manufacturers that obtain and retain their VAT certification do not pay Value Added Tax on their temporarily imported goods.

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