On December 31, 2020, Mexico published a new decree by which it expands a number of fiscal benefits to 22 municipalities located in the southern states of Quintana Roo, Tabasco, Campeche and Chiapas. Among the main benefits extended to those locations is the reduction of the standard VAT rate to 8% to all sales and purchases of goods and services, where both the seller and the purchaser are located within the cities listed in the decree. The application of this new rate is not automatic but conditioned to compliance with several requisites by the businesses wishing to benefit from the rate reduction, including that:
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the business should request and obtain permission from the tax administration (SAT) in order to apply the reduced rate;
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the business should not be listed as bad taxpayer by the SAT;
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the taxpayer should have a banner in its location informing that he is applying the special rate approved by the law.
Also, there are some sales to which the reduced rate can never apply, such as sales of intangibles, digital goods and services, real property and transportation services outside the region. Businesses that do not comply with these requisites, and others mentioned by the Decree, should keep applying the standard 16% rate of the Mexican VAT. The decree can be found here.
