Mexican maquiladoras have been open to U.S. companies since the mid-1960s. The major advantage of owning a maquiladora? The maquiladora tax benefits. Those, coupled with cheaper labor costs and quicker delivery, are reasons you should consider setting up a maquiladora in Mexico for your business.
Thanks to legislation like the IMMEX program and NAFTA, maquiladoras have some valuable tax benefits. Business owners looking to optimize manufacturing efficiency should be aware of these benefits. For some, maquiladora tax benefits can have a significant impact on profits, costs, and more.
No one was exactly sure what effect the North American Free Trade Agreement (NAFTA) would have on maquiladoras. But any uncertainty was short-lived as the trade accord appeared to further help maquiladoras. Northern Mexico became the hub for maquiladoras, especially along the U.S.-Mexico border. In fact, over 1 million Mexicans work in more than 3,000 maquiladoras in northern Mexico alone.
NAFTA brought along some policies that seem to be advantageous to American companies doing business in Mexico:
In 1972, Mexico passed the maquiladora law. This led to a fast increase in the number of maquiladoras in Mexico because of the tax advantages. U.S. companies were able to pay less for the storing and making of their materials and goods. Here are some specific examples:
There are two types of maquiladoras: sole ownership and shelter. The difference is in sole ownership, the U.S. company owns the maquiladora as a subsidiary. In a shelter set up, a Mexican company provides contract manufacturing services to the company and charges its customers a fee. For a shelter, a U.S. company will not be considered to have a permanent residency for up to four years. Once those four years expire, the company will be subject to having some or all of its production taxed.
There are more tax breaks a manufacturing operation can earn by being located in Mexico. A business can get a further tax deduction of 47% on benefits provided to its employees in Mexico. These include things like pension or retirement funds, overtime, profit sharing and other bonuses.
Another reason in setting up manufacturing in Mexico is the Value Added Tax credit. A VAT of 16% is due on temporary imports, but a maquiladora gets a corresponding credit for the full amount once it exports the product back to the U.S.
With certain tariffs and taxes axed, establishing a maquiladora in Mexico is already attractive to foreign companies. Those advantages extend to the real estate market. If a U.S. business owns its Mexican subsidiary outright and the facility, it will generally pay lower property taxes than if the same factory is located in the United States as Mexican property taxes are lower.
Setting up a maquiladora in Mexico might be the right call for your business to prosper. If that’s the case, let R+L Global Logistics handle your freight needs.
R+L Global Logistics offers comprehensive services for all aspects of supply chain management, has a 99.5% on-time rate and provides a distinctive customer experience. No matter whether arranging cross border shipping from Del Rio or Calexico, we have the services you need to get your freight moving.
Contact us today to receive a quote for your maquiladora cross border shipment and we’ll handle the rest.