Taxpayers Face Big Financing Costs From VAT Bill 2017

Amendments to Mexico's VAT Law will significantly increase the costs for business taxpayers. Cesar De la Parra and Ignacio Mosquera of Chevez, Ruiz, Zamarripa y Cia explain the changes.

A bill of tax amendments submitted by the Executive Branch and approved by the Mexican Congress included changes to Article 5-I of the Value Added Tax Law (VAT Law), regarding the creditable VAT of fixed assets or expenses incurred in preoperative periods (i.e. before generating VAT income on its activities).

Under Article 5-I as it now applies, taxpayers may credit VAT paid on the purchase of fixed assets and/or on expenses incurred in a preoperative period.

Prior to the amendment, which will have effect from January 1 2017, taxpayers were allowed to request the refund of monthly favourable balances of VAT and, in general terms, in a 40-day period the taxpayer would receive the VAT refund. However, the government said this VAT crediting system was making it difficult for tax