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México: Tax Benefits 2024

Mexico • Jan 5, 2024 3:35:42 PM • Written by: Ongresso - Business Beyond Border

With a number of clever tax breaks, Mexico is promoting itself as a top location for tech businesses. Targeting the tech industry, the recently published Decree Granting Tax Benefits which came into effect on October 12, 2023, and will offer accelerated depreciation and additional deductions for training costs. This decree aims to take the Mexican tech sector to new heights by introducing a slew of alluring tax breaks, such as accelerated depreciation and additional deductions for training costs.

Overview of Tax Incentives:

  • Accelerated Depreciation: For new fixed assets, such as machinery and equipment, it can range from 56% to 89% depending on the specific assets involved. It allows eligible companies to invest an amount of their investment in a shorter time.
  • Training Expenses Deduction: A 25% deduction will be made for any excess training costs beyond the average of 2020–2022 that are incurred between 2023 and 2025. Companies can develop the knowledge about technic and scientific of their workers.
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    List of Assets, Source: BBVA Research

Tech Depreciation Acceleration:

  • As tech assets such as circuits, capacitors, semiconductors, and electronic components enjoy the benefits of accelerated depreciation, seize the financial advantage in Mexico's tech scene. Because of this tactical advantage, the value of these assets will be reduced in a streamlined and quick manner, giving tech companies more financial flexibility and enabling them to react to changing market trends more quickly.
  • Faster Return on Investment (ROI): Compared to traditional depreciation methods, tech companies can take advantage of faster Return on Investment (ROI), which enables them to recover a significant portion of their investments in a shorter amount of time. This creates a dynamic and flexible financial environment that supports technological innovation and growth.
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These incentives are available in all states and municipalities of the country, extending the window of opportunity for one year for interested companies," added the Undersecretary of Finance.

Tech Workforce Training Expense Deduction:

  • Emphasis on Innovation: The 25% deduction incentivizes technology companies to allocate resources towards augmenting the technical and scientific proficiencies of their labor force, thereby promoting innovation.
The Workings of Tech Company Tax Benefits:
  • Depreciation of Capital Assets: When planning your taxes for 2024, take into account the favorable depreciation of capital assets. By quickly deducting costs associated with new technology assets, you can quickly lower your taxable income while also remaining on the cutting edge of innovation. In addition to being in line with technology developments, this strategy provides significant financial gains by taking advantage of tax deductions related to the depreciation of these assets.
  • Extra Tax Deduction: To encourage ongoing professional growth, there is a unique chance in the form of an additional tax deduction. Take advantage of a 25% tax deduction on excess training costs when you file your annual tax returns. This tactical reward contributes to the development and expertise of your staff and yields long-term benefits for your company. With the additional benefit of tax relief, prioritizing and funding employee training turns into not only a financially sound move but also a developmental one.
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Standards and Adherence for Technology Enterprises:

  • Compliance with Deductibility: Comply with the Income Tax Law's deductibility rules.
  • Continue to be enrolled in the Federal Taxpayer Registry in order to be eligible.
  • Maintain a positive compliance opinion with the Mexican Tax Service (SAT) regarding tax compliance.

 

Conclusion: The tech industry in Mexico is receiving special tax breaks, which are a significant development for the nation's economy. Mexico wants to establish itself as a center for technological innovation by luring in tech investments with deductions for training expenses and accelerated depreciation. These tax advantages offer a strong argument for selecting Mexico as a nearshoring location as tech companies consider relocation options, establishing a win-win partnership between investors and the developing Mexican tech sector.

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