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 Volkswagen will invest US$1 billion in Mexico
Mexico City - The German automotive company Volkswagen is planning to invest One Billion US Dollars between 2008 and 2010 in its plant in Puebla, in central Mexico, its President, Martin Winterkorn announced last Friday. During the presentation of a special edition of New Beetle, to commemorate its 10th anniversary, Winterkorn said that the investment will be applied in the production of Bora and Jetta models.
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French investors invest US$130 million in glass factory in Morelos
With a US$130 million investment, the French Company Saint-Gobain opened its. glass factory Float Cuautla II in this municipality, which will generate more than 100 new permanent jobs. During the Plant's inauguration and before President Felipe Calderon, Herve Novelli, French Minister in charge of foreign trade companies, said that these investments show the confidence there is in Mexico, even if he considered that trade relations between both nations are sometimes wasted.
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Oaxaca will receive millionaire investment in Aeolic energy
Mexico City - In less than 5 years, Oaxaca will add a.new species of its ample vegetal horizon: the air-generator. Several private companies, mainly foreign, have a list of projects to generate wind energy, that will fully take Mexico into the world current of alternative energies. Experts assure that the State of Oaxaca, where most of the projects will be developed, represents a power in wind energy, which supplies 20% more than world average.
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Japanese company will inaugurate factory in Nuevo Leon
Mexico- With a US$35 million investment, Toto Sanitarios de Mexico will inaugurate this Wednesday a bathroom ware factory, the Japanese Company informed. Naohisa Kamishimbara, Director, said that the plant will be first this Company has in Mexico and will generate 260 direct jobs in its first stage. He said that "the plant's purpose is increasing Toto products share of the US market, as well as cutting down the time required to deliver products to customers there".
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Hybrid cars will be manufactured in Aguascalientes
Aguascalientes will be the headquarters of a plant to be built by Spaniard investors.to produce hybrid and fully electric ecological cars, for both, the Mexican and US markets. The State Governor, Luis Armando Reynoso Femat, informed this, three days after he arrived from his business trip to Spain and France to promote investments in the automotive, real estate, logistics and tourism sectors.
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Yazaki consolidates production in Durango
Yasuhik Yazaki, Chairman of the Board of Yazaki Corporation, was in Durango for the inauguration. of the fourth plant to manufacture harnesses for automobiles of different brands. In an unusual event, the very owner of Yazaki Corporation was in Durango to supervise the start of one more plant to be operated by this Company, which is the fourth in the State, but will not be the last, as Riku Yazaki, son of Yasuhik Yazaki, clearly stated. In his inaugurating speech, Riku said they contribute to joining three cultures in Durango with the opening of this new plant.
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Automotive supplier: Meridian could bring a plant to Saltillo
Meridian Automotive System Inc informed early in January they were ready for an expansion and were planning to build a plant in Hermosillo, Sonora and another one in Saltillo, Coahuila. Among the information provided by the Company stands out the decision to open Mexican plants in Hermosillo in October and in Saltillo, either late this year or early in 2009.
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Kemet rules out leaving Mexico
Monterrey, Mexico- The decision to cut down 250 jobs in Monterrey, Matamoros and Ciudad.Victoria to move some processes to China does not mean the closing of plants in any state where there are operations in Mexico, quite the opposite, Kemet has growth plans, Dean Dimke assured. Kemet's Communications and Corporate Marketing Director, explained this decision was made to cut costs and it has nothing to do with the US current economic situation.
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ARTICLE OF THE WEEK
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| 2008 Mexican Tax Reforms - Part V |
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By PriceWaterhouseCoopers |
 Financial system entities
Interest income is not subject to Flat Tax for non-financial system entities to the extent it arises from regular financing activities. However, financial sector entities which include credit institutions (banks), the general deposit warehouses, financial leasing companies, stock brokers, credit unions, financial corporations, the financial factoring companies, the “limited object” financial companies and the “multiple object” financial companies (which are members of the financial system in accordance with the MITL), as well as taxpayers exclusively engaged in financial intermediation and those engaged in collection of receivables pertaining to credit portfolios, are required to consider the following base for purposes of determining the Flat Tax margin for financial intermediation activities:
Accrued interest income
(minus)
Accrued interest expense
(plus/minus)
Result of the net monetary position
(equals)
Margin of financial intermediation or Flat Tax base
For these effects, “interest” has the same definition as thedefinition for Income Tax purposes, and is an accrual vs. cash method of accounting concept, generally used for other Flat Tax purposes.
The activity of a financial service entity will be considered exclusively as a financial intermediation activity, when the income from this concept represents at least 90% of the total Flat Tax income of the taxpayer.
The result of the net monetary position corresponds to debt obligations whose interest income and expenses are measured on a margin basis and are calculated in accordance with the requirements which must be observed by the members of the financial system.
The Flat Tax applies to the other services for which financial entities receive consideration in the form of commissions.
 Insurance companies (margin of financial intermediation)
In the case of insurance companies, the margin of financial intermediation will be determined by adding the accrued interest income corresponding to the resources that are subject to mathematical reserves of life and pension insurance, referred to in the General Law of Insurance and Mutualistic Insurance Companies (LGISMS) and the accrued interest on the resources represented by the funds used to administer life insurance contracts, minus the interest that refers to mathematical reserves and the additional accrued interest owed to the insured.
Insurance companies will have the following additional deductions:
1. The creation or increase of the mathematical reserve which is linked to life or pension insurance, as well as the creation or increase to the funds used to administer life insurance programs.
2. The creation or increase of the special mathematical reserve, as well as the other reserves included in the LGISMS.
3. The creation or increase of catastrophic event reserves, for the part that exceeds the real interest. If the real interest is greater than the amount of the creation or increase to these reserves, the difference will be considered as taxable income for Flat Tax purposes.
4. Amounts paid by insurance companies to the insured or their beneficiaries, as well as the amounts paid by bonding companies to cover claims.
5. The losses arising from bad debts, with respect to the services yielding interest income, whenever certain deductibility requirements are met.
6. A deduction also applies to amounts arising from debt forgiveness, allowances, and discounts on credit portfolios which generated interest income, as well as losses originating from the sale of the credit portfolios.
 An option is provided in lieu of the options previously mentioned, whereby the credit institution will be able to deduct the preventive global reserves that are created or increased, observing the rules established in the Credit Institutions law, as well as by the National Banking and Securities Commission, with respect to those debt obligations classified as risk type C, D and E, but the deduction cannot exceed 2.5% of the annual average balance of the portfolio of total credits of the corresponding tax year. In the cases that the accumulated balance of the global preventive reserve as of December 31st of the taxable year is smaller than the balance at the closing of the immediately preceding taxable year, the difference is considered additional Flat Tax income. Once this option is selected, it must also be applied in future years.
Gains and losses from purchase and sales of currencies
The purchases and sales of currencies is not subject to the Flat Tax, except when it is the primary business activity of the entity engaging in such transactions. It is considered that a taxpayer is primarily engaged in this trade or business when this income represents at least 90% of its total income.
Flat Tax for taxpayers in bankruptcy proceedings
According to the FTC, when the declaration of bankruptcy is filed with the competent court, the collection of Flat Tax will be suspended until the agreement is signed by the taxpayer with the creditors and the tax authority, or until the bankruptcy decree is issued by the court and then the Flat Tax can be forgiven.
The suspension of the payment of the Flat Tax, as well as its forgiveness, will apply to those taxpayers who on the date the Flat Tax law was enacted, had filed the declaration of bankruptcy, or executed an agreement with their creditors in terms of the Bankruptcy law, according to the following:
 1. The agreement must stipulate that the taxpayer will enjoy the suspension of the Flat Tax while the agreement is in effect, without exceeding three years beginning on January 1, 2008.
2. At the end of those three years, the authorities will forgive the payment of the Flat Tax according to the following:
a) The Flat Tax will be updated for each taxable year that the obligation was in suspension.
b) The amount forgiven each taxable year will be the amount determined by multiplying the Flat Tax for each taxable year by the factor resulting from dividing the Flat Tax income that would have been recognized if such law had existed in 2007, by the total Flat Tax income in each taxable year.
c) The difference between the Flat Tax caused in the taxable year and the forgiven amount must be paid by March 31 of the taxable year which immediately follows the last year in which the suspension of collections of the Flat Tax applied, which cannot exceed three years.
The benefit will not apply in the following circumstances:
1. When during the suspension period, the taxpayer agrees to a merger transaction.
2. When during the suspension period, a change of shareholders representing more than 10% of the voting shares occurs.
3. When during the suspension period, the taxpayer changes its predominant activity.
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© 2007 PricewaterhouseCoopers. All rigths reserved “PricewaterhouseCoopers” refers to the network of PricewaterhouseCoopers International Limited members firms, each of
wich constitutes an autonomous and independent legal entity. * connectedthinking is a PricewaterhouseCoopers registered trademark.
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MEXICO'S WEEKLY HEADLINES
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» 1. Maquiladora loses 7,000 employees in 3 months
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» 2. Coahuila's South-East region industry expands
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» 3. United Kingdom interested in doing business in Mexico
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» 4. Isuzu opens agency in Sonora
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» 5. KCSM wants terminal in Queretaro
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