Special Fiscal Zones Will Help Maquiladoras Tax and Logistics Operations
By MEXICONOW Staff Report
Changes to Mexico’s “Recintos Fiscales Estrategicos” regime have been welcomed cautiously by the country’s business community, which recognizes that the alterations could have great advantages for many manufacturing and exporting companies.
The changes to the regime – RFE being best translated to Strategic Fiscal Zones – which were first announced 12 years ago and modified on 4 February, 2016, mainly affect imports and exports, something that was of great interest to representatives of INDEX, the umbrella organization for manufacturing and exporting companies in Mexico, and foreign companies that have invested heavily in Mexico.
An RFE is simply an “In-bond” area for import/export tax purposes. For example, imported materials can go into an RFE without paying trade or sales taxes, they can be processed, and the applicable taxes would be due until the finished product goes out of the RFE limits.
The interest from both those sectors was evident during a forum held in Mexico City recently in which the government outlined the changes and the alleged benefits for business.
Dr. Luis Videgaray Caso, Secretario de Hacienda y Crédito Público (Mexico Treasury Secretary), told the Forum that the changes were aimed at breathing new life into the RFE regime, which has been in place for almost 12 years.
He said: “What we are looking to do is give them new life and create more RFEs. The numbers show successful cases but it is a system that has been used very little. There have been only 12 authorizations and only three working in three years. That means that the RFE can and should grow.”
He added, to the satisfaction of companies and INDEX representatives present: “That means we must analyze the system often and punctually and listen to the opinions of the private sector.”
The Secretary said the changes would attract capital, generate employment, increase competitiveness and growth in the manufacturing and export sector.
He said: “We have called you to this forum today, first for you to know those modifications and secondly so those operating today in the maquiladora business, and those interested in it, have more information.”
“We bring to your attention today the industrial parks in the maquiladora industry and in manufacturing industry of exportation. What we want is to have the opinion of all. What can we do to realize the potential of the RFE so it can meet the expectations of 12 years ago?
“In the first place, we have series of tax modifications that start by simplifying the processes of certification for IVA (value added tax) and IEPS (Special tax to products and services), a form of excise tax, that we have developed together with the Mexican maquiladora industry of exportation and that we have extended to other areas of the economy.”
“It means the process of certification for those companies accredited show that those are companies that can be trusted and will automatically receive preferred treatment for IVA refunds and other contributions.”
“We will see that those companies have a faster transit for devolution of taxes, even more agile than before the modifications of 2013/14 were established. Now, what the new RFE means is that you will automatically have the certification.”
“Other simplifications that have been suggested are optimization of the authorization process, lesser waiting times and that new program procedures will be immediate.”
“The RFE is a system that will have renewed energy and application and will grow as an instrument of competitiveness in foreign trade both at the border and other areas of the country.”
“I must stress that these changes come from long dialogue with different areas of the private sector and, to reiterate, what we are looking for is giving new life and stimulation to RFEs for the benefit of all.”
Also present at the Forum was Ildefonso Guajardo Villareal, Secretary of the Economy, who said that it was the export sector which had brought forward the economy of Mexico at important times and that the changes to RFE regime were designed to aid the export sector.
He reminded the audience that of the about US$20+ billion in foreign direct investment that reaches Mexico every year, 58% was earmarked for the manufacturing industry and, especially, for the manufacturing and export industry.
At the end of the government presentations, Federico Serrano, National President of INDEX, commented that RFE was a valuable instrument for strengthening the competitiveness of the industry in Mexico, in particular the productivity in those areas such as operations to international markets or those with an interest in reducing logistics costs and improving the efficiency of processes such as customs.
He told Mexico Now: “I am glad the government has said that it will listen to business to help maximize the geostrategic location of Mexico in terms of logistics and international trade, strengthen us as a bridge, and even more so as the centerpiece in the flows of the largest market in the world, the USA.”
Francisco Uranga, Vice President Latin America for Foxconn, the giant Taiwanese-owned electronics company that has large investments in Mexico, took time out from his busy schedule to tell Mexico Now: “The best thing I heard at this Forum today was that the government has completely renewed the RFE. The way it was previously, it was doomed to die. No doubt about that. So at least they have given the RFE new life.”
“Another important thing said here today was that the government is open to proposals for dialogue with the private sector into how best to implement the new, improved RFE.”
“I look forward to further dialogue with the government and I believe such dialogue will be necessary because some people are not grasping the idea of an improved RFE yet. But once they understand that all our taxes can be mixed and matched and that they can have faster, direct access to customs, they will soon come around.”
“I really do believe the doors are open now. Of course, it won’t all happen tomorrow. Mr. Videgaray was quite clear that he was talking about the future. But I would say that anybody that wants to attract any international industry would be stupid not to side with these new guidelines.”
“But it would also be dumb for the government to believe that all Mexico’s manufacturing industries would all of a sudden relocate to an RFE industrial park, as recommended in the new guidelines. That’s just not going to happen. So, I think it may take a couple of years for the new RFE tax to make an impact.”
“Today I am quite confident in the future of the RFE and its ability to help manufacturing and exporting companies in Mexico. A year ago, I wasn’t confident at all and I may not be so confident a year from now. But today, yes, I am quite happy.”
And that just about sums up the attitude towards the RFE changes from all of the Mexican manufacturing and exporting industries.