APRIL 2006 EDITION ARCHIVE
Legal Updates
Tax Lawsuits Against Deductibility of Inventory Purchases
In December 2004 Mexico amended various provisions of the Income Tax Law related to the deductibility of inventory purchases. As of January 1, 2005, Mexican businesses were not permitted to deduct inventory purchases in the same fiscal year they made such purchases, instead being required to take any such deductions at the time of sale of the final products into which such inventories were included. Based on this tax reform, more than 12,000 businesses in Mexico filed constitutional tax... [Read More]Mexico's Senate Approves Draft Reforms to the Foreign Investment Law Regarding Neutral Investment
The Mexican Senate recently approved a draft that would amend the Foreign Investment Law in neutral investment matters. The proposed changes would limit and condition use of neutral investment as a method to allow, with prior authorization of the Mexican Department of the Economy, participation by foreign investors in activities currently restricted to Mexican investors. The American Chamber of Commerce Mexico (AmCham) has stated its opposition to the draft and has announced that it will... [Read More]Differences between Maquila and Pitex Programs
Both the temporary importation Program for Production of Articles for Exportation (Pitex) and the Maquila Exportation Program are designed to increase exports and are similar in their regulation and operation, but some important differences should be considered when one decides whether to pursue one of these programs, including: (i) Permanent Establishment: the risk of having a permanent establishment is greater for a Pitex operation because it is not subject to the "safe harbor" transfer... [Read More]Case Decision LXXXVII/2005
Customs Transmittal Fee, Article 49, Paragraph I, of the relevant law in force on January 1, 2005 is unconstitutional. The Supreme Court of Justice of Mexico has established that the tax principles of proportionality and equity contained in Article 31, Paragraph IV of the Political Constitution of the United Mexican States are met, in regard to fees collected for services, when the amount of the fee bears a reasonable relationship to the cost of the government to provide such service, in addition... [Read More]Comment
This case decision is important in that it establishes the necessity of any government fee to be related to the cost of providing the government service, which fee in this case is collected by customs authorities. To attempt to collect a customs transmittal fee of 8 per 1,000 in reference to the amount of merchandise being imported clearly violates the principle that the fee must bear a relation to the costs of providing the service. With this decision, taxpayers may now appeal through... [Read More]Schedule of Company Obligations for Mexican
In the months of April and May Mexican entities must meet the following obligations: (i) in labor matters, they must pay to their workers the corresponding employee profit sharing payment, in conformity with the Federal Labor Law, and (ii) in regard to foreign investment, such companies must renew before the end of April their certificate of inscription in the Mexican National Registry of Foreign Investments by presenting an annual economic report and quarterly report.Business & Politics Outlook
Growth Predicted and Pending Reforms
The Interamerican Development Bank (IDB) estimated that the Latin American economy will grow around 4% in 2006, although it did state the region's economy could experience a period of volatility based on electoral contests currently under way in the region. Luis Alberto Moreno, president of the IDB, pointed out that Mexico had in 2005 a better year of growth than it had the previous year, with the country having important reform goals in the tax, energy and retirement sectors. In this regard... [Read More]Poll Numbers Drop for Andrés Manuel López Obrador
With fewer than 100 days left before the July 2nd Mexican federal presidential election, Mexican political campaigning is heating up, particularly with radio and television spots run by Roberto Madrazo, candidate of the Institutional Revolutionary Party (PRI) and Felipe Calderón, candidate of the National Action Party (PAN) against Andrés Manuel López Obrador, of the Party of the Democratic Revolution (PRD). This has resulted, according to political analysts in a decrease in... [Read More]Economic Indicators
Pesos/Dollar Exchange Rate
The current quoted exchange rate as of April 12, 2006 was $11.07 pesos per dollar.Mexican Stock Exchange
The Mexican Stock Exchange (BMV) closed on April 12, 2006 at 19,322.62 pointsInterest Rates
The Average Interbank Interest Rate (TIEE) for a 28-day period was at 7.58%.Feature Website
Ordenjuridico.gob.mx
We recommend to our clients and friends the following web page: www.ordenjuridico.gob.mx, where one may find electronic versions of current federal laws and regulations, as well as the current laws of Mexico's 31 states and federal district.