Doing Business

Doing Business in Mexico 2015

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18 Tax and Legal Services - PwC Mexico Overseas trade relations Membership in trade blocs Mexico joined the GATT (currently WTO) in 1986. This membership, as well as reductions in import duties and formalities adopted in 1988 as part of the effort to control internal inflation, has increased the volume of merchandise imports/exports to/ from Mexico. Mexico is also a member of the Latin American Integration Association, which provides for reductions in duty rates on merchandise imports from members of the association. The North American Free-Trade Agreement (NAFTA) has been in effect since January 1, 1994. In addition, in July 2000, Mexico and the European Union entered into a multilateral free-trade agreement substantially reducing tariff and non-tariff barriers to free trade between the two regions. Mexico has also entered into free-trade agreements with Colombia, Venezuela, Bolivia, Costa Rica, Chile, Nicaragua, Guatemala, Honduras, El Salvador, Israel, Uruguay and the European Free Trade Association (Iceland, Norway, Lichtenstein and Switzerland). In addition, an Economic Association Agreement with Japan has been in force since April 2005. Exports Mexico provides some incentives for exporters. The main tax incentive is the zero rate of value-added tax (VAT) applicable to exports and the consequent right to the refund of VAT charged by others on materials, supplies and services used in the production of exports or the credit of such charges against a company's VAT liability for its activities subject to the tax. Trade barriers In previous years, industrialization in Mexico was extensively promoted as a mean for eliminating imports, and considerable protection was granted to the new local industries in the form of high import duties on competing products, the requirement of prior import permits or outright prohibition of such imports. Mexico's entrance into GATT, its free-trade agreement network, its efforts to reduce inflation by facilitating imports since 1988 and the improvement in Mexico's balance of payments have all resulted in reductions or eliminations of trade barriers, and this trend is expected to continue. The requirement of a prior import license or permit has been repealed, except in special cases, such as for strategic minerals, e.g., uranium. Import duties have been drastically reduced from an average of 100% to around 8% or even lower.

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