Compliance Implications Abound for Maquiladoras in Mexico

Scott Lewin
May 16, 2016

Maquiladoras, a special class of manufacturers in Mexico, benefit from reduced tax obligations, making business-to-government compliance accuracy even more critical for the companies holding this status. A change in a manufacturer’s Maquiladora certification would impact its tax rating, increasing tax liabilities and affecting cash flow.

Introduced in the 1960s to increase employment in Mexico, the Maquiladora designation allows select manufacturers to import materials and equipment tariff-free for assembly, processing and/or manufacturing, and then export the finished product. These manufacturers are a significant portion of Mexico’s industrial environment – second only to petroleum – and therefore are a large contributor to Mexico’s overall economy.

This select group of manufacturers includes many of the multinationals operating in Mexico, and they are subject to specific regulations designed to ensure they meet Maquiladora requirements, including satisfying Mexico’s transfer pricing guidelines. As such, compliance with e-invoicing and e-accounting measures in Mexico is especially important to Maquiladoras, as these taxpayers not only risk fines, penalties and operational disruptions for errors, but also risk their tariff-free tax status for imports.

Manufacturers designated as Maquiladoras must keep specific records of their Maquiladora and non-Maquiladora-related activities, and all revenue-generating operations must be related only to Maquiladora activities. These manufacturers cannot earn revenue from any endeavors other than those that are Maquiladora-related, and must create separate entities for local sales, distribution and service-oriented operations. Additionally, Mexico has specific requirements for the ownership of machinery and equipment used by Maquiladoras – again requiring detailed records to prove compliance.

Special VAT incentives apply to Maquiladoras. Specifically, those with certification can credit VAT paid on imports against their VAT obligations, eliminating the need to claim a refund and improving cash flow. However, obtaining this certification requires approval by the SAT, Mexico’s tax authority, meaning that the applicant’s business-to-government compliance initiatives – eContabilidad accounting records, in particular – must be in order, and all tax liabilities must be cleared.

Three types of VAT certifications are available to Maquiladoras – A, AA, AAA, with each “A” representing how many years the certification is valid. Each have separate requirements, but all require significant involvement from the SAT, as well as satisfactory inventory management and accounting records – with details on imports, manufacturing and exports. The SAT can audit Maquiladoras at any time, and may downgrade or revoke certification for compliance issues or errors, which would have significant implications on cash flow, operating costs, supply chain management and, of course, tax liabilities.

Accurate compliance measures are critical to any company operating in Mexico, but Maquiladoras have even more to lose in the event of an error or discrepancy – their tax benefits. That’s why automated receiving, AP processes and reporting are especially important to these multinationals. Contact us to learn how we are automating compliance for some of the world’s largest manufacturers.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Scott Lewin

Gain timely insight and important up to the minute information about the current legislative changes in Latin America, including Brazil Nota Fiscal, Mexico CFDI, Argentina AFIP and Chile DTE. Learn how these changes affect your operations, your finances and also your Information Technology teams.
Share This Post

North America Sales & Use Tax
June 1, 2023
3 Things to Remember if You Get a Sales Tax Notice

Have you ever received a sales tax notice from a state department of revenue? Whether you answered yes or no, there are important things to keep top of mind to help keep your business prepared. Finding out that you have failed to comply with one or more of your sales tax obligations can be startling. […]

North America Unclaimed Property
May 30, 2023
How to Set Up a Successful Unclaimed Property Program

Unclaimed property compliance can be difficult and overwhelming. Clients often ask what they should be doing to ensure they are compliant with the various laws and regulations. It isn’t easy, especially if you have multiple property types such as checks, credits or customer accounts that have the potential to become unclaimed property in multiple states. […]

North America ShipCompliant
May 30, 2023
How Hold At Locations Improve Your Customers’ Wine Delivery Experience

Direct-to-consumer shipping wine lovers enjoy the convenience of having their favorite vinos shipped to their front door. But what happens when, for whatever reason, they aren’t available to accept their wine deliveries? Whether they aren’t available during the day or they don’t have someone 21 or older available to sign for their package, these challenges […]

North America Sales & Use Tax
May 30, 2023
Identifying Sales Tax Liabilities and Why They Matter

By Steve Claflin, CLA It’s incredible that it has now been five years since the landmark Wayfair decision. It seems like just yesterday we were reading the case, alerting clients and tracking the ever-developing state guidance. Unfortunately, many companies still are not familiar with their sales tax filing obligations caused by economic nexus, or they […]

North America ShipCompliant
May 25, 2023
Out-of-State Breweries Gain Self Distribution, DtC Rights in Oregon

Under a settlement agreement, breweries located outside of Oregon now have more options for selling into the Beaver State, including direct-to-consumer (DtC) shipping and self-distribution to retailers. The settlement arose out of a lawsuit filed by a group of Washington breweries last year challenging Oregon laws that limited beer self-distribution to in-state breweries and DtC […]