Reduced income tax rate effective due to Mexico repatriation program

by Julio Valdez on February 2, 2017

The Mexican government included a new repatriation program in its presidential decree issued on January 18, 2017.  The program reflects Mexico’s efforts to encourage investment in certain strategic areas within Mexico and to incentivize Mexican companies to repatriate their liquid assets.  While not an all-inclusive list, a summary of the repatriation program is as follows:

  • Mexican entities holding funds outside Mexico can repatriate them at a reduced income tax rate.
  • The program begins January 19, 2017 and is valid for six months.
  • An 8 percent income tax rate will be applied to the gross amount of funds maintained abroad before January 1, 2017 and repatriated to Mexico.  The reduced income tax rate is a significant reduction from the Mexican corporate income tax rate of 30 percent.
  • The 8 percent income tax rate highlighted above can also be reduced through a credit for foreign income tax paid on cash that was earned.

Funds repatriated to Mexico must be reinvested in specific areas and for investment specified within the decree (i.e. acquisition of fixed assets, land, or buildings in Mexico, repayment of loans with Mexican financial institutions, or investment in research and development in Mexico).

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