Mexican Companies Now Permitted to Make Inventory Balance Corrections on “Annex 31” When Complying With VAT Certification Requirements

Mexican Tax Authorities (SAT) announced late on Thursday, January 29, 2015, that Mexican companies, including IMMEX and other maquiladora operations, that have received Value Added Tax (VAT) certification (certificación en materia de IVA e IEPS) and that successfully submit the required inventory balance statement (Annex 31) by January 30, 2015, will be granted an opportunity to make corrections to their Annex 31 inventory balance submissions up to three months after initial submission. 

As background, in late 2013, the Mexican legislature passed tax reforms that among other changes eliminated the exemption on VAT for temporary imports previously enjoyed by maquiladora companies.  A VAT of 16 percent was established for all imports, regardless of the location of the manufacturing facility within Mexico. However, in 2014, SAT issued certain tax benefits in order to mitigate some of the effects of the 2013 tax reform. Among these was the VAT certification program, a program that provides compliant certified companies with a financial credit to offset the effects of the 16 percent VAT levy due on all imports. 

In November of last year, SAT published a requirement that VAT certified companies must submit to SAT a complete inventory balance as of December 31, 2014, in Annex 31 within 30 days of the commencement of the certification period (January 1, 2015).  Initially, the requirement that inventory balance information in Annex 31 be submitted by January 30, 2015, did not provide for subsequent submission of corrected inventory information.  This has caused concern among importers whose inventory balances contain inaccuracies or deficiencies.     

However, due in part to significant lobbying by maquiladora industry groups, SAT has softened its position.  Importers that have received VAT certification and submit inventory information in Annex 31 by January 30, 2015, may make up to two corrections to those submissions within three months of that date.

Drinker, Biddle & Reath will continue to monitor any changes to the VAT certification program in Mexico, as they have significant impact on U.S. companies with Mexican operations. 

If you have any questions regarding the VAT certification program requirements or this recent announcement, please do not hesitate to contact the author listed above, or any other member of Drinker Biddle’s Customs & International Trade Team.