Value Added Tax (VAT) in Mexico


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In Mexico value added taxes are imposed on the sale of goods as well as services. The general rate of value added taxation in Mexico is 15%. The same rate is also applicable as far as importing of goods and services are concerned. However the rates of value added taxes in Mexico is lower in the areas that are located on the international border of Mexico.

In these areas the rate of the value added taxes is 10%. however, certain commodities are excluded from the value added taxes in Mexico. For example, the non residential real estate properties are subjected to the value added taxes but the land upon which the particular property has been constructed is exempted from taxation.

The value added taxes in Mexico are part of the Federal Tax Structure of Mexico. It may also be regarded as one of the principal taxes in Mexico. The various items that are exempted from value added taxes in Mexico are sales of land, financial services, books, medical services, credit instruments like equity shares, education, residential construction, rental expenses of residential properties and raw materials for residential construction. However there is an exemption made in case of the medical services. The interest that is earned by the credit card providers in case of medical services is subjected to value added taxes.

The taxes that are paid by the business organizations when they buy goods are normally adjusted against the tax that they pay when they sell any goods or services. The tax on sales is applicable for all the customers as well. In case there is an excess amount of credit it may be paid back by the tax authorities to the concerned business organization.

There are a lot of transactions that are exempted from value added taxes in Mexico. However the money that is paid on buying raw materials, services and supplies may be recovered by through either direct refund or by adjusting the amount against the value added tax the particular individual is supposed to pay. The categories that are included in this list are rentals, export of goods. sale of specific basic foodstuffs, export of services, agricultural goods, sales to maquilodras, who are in-bond assembly plants of Mexico, agricultural services and sales to companies that deal exclusively in the export of goods. There are also certain other minor transactions that are included in this list.