As you probably know, from 2000 until 2003, the tax authorities, either through miscellaneous rules or through transitory articles of the Mexican "ax L"01C;MITL”), allowed newly established maquila companies to apply the Safe Harbor rule, using 6.5% of the total costs and expenses incurred in the maquila activity instead of applying the greater of 6.9% of the return on assets and the 6.5% referred to above.
This would enable those newly established maquila companies to generate, during the year they started their maquila activities, a return in accordance with the activity developed by them during such year, instead of obtaining a return based on their investments.
In this regard, and with the purpose of granting the same benefit to maquila companies incorporated during 2004, Rule 3.26.9 of the Fiscal Miscellaneous Resolution was published in the Federal Official Gazette on August 31 of this year. Such Rule provides that newly created maquila companies may apply the provisions of Article 216-Bis (II) of the MITL if the tax profit for the year 2004 represents at least 6.5% of the total costs and expenses incurred in the maquila activity.
However, to be able to apply the provisions referred to above, certain requirements must be met. For instance, such maquila companies must have been created during 2004, and their creation cannot be the consequence of a merger or a spin-off; they must have obtained a maquila program for the first time during 2004; and over 10% of the total value of the assets used in the maquila activities has not been previously used or purchased by another maquila company.
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Finally, it is important to point out that, although Rule 3.26.9 grants a benefit to newly established maquila companies, to have access to such benefit, as an essential requirement, maquila companies must waive the benefit granted under Article Eleven of the Decree published in the Federal Official Gazette on October 30, 2003, which grants a partial income tax exemption to maquiladoras. For this reason, the application of that Rule is recommended only for those newly established maquila companies that are willing to choose the Safe Harbor rule during 2004 and that estimate that the proportion of the total assets used in the maquila activities as compared to the costs and expenses incurred in their activity will be at least 217%, that is, that the value of the assets is over 2.2 times the amount represented by the total costs and expenses incurred in the maquila activity, as shown in the following chart.
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| By Baker & McKenzie |
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