Companies within this program are eligible for refund of import taxes paid for imported parts incorporated into the exported goods. Under the Maquiladora Decree, maquiladoras are industrial enterprises which are dedicated to the assembly, transformation or manufacture of foreign inputs temporarily imported free of customs duties and subsequently exported after having undergone assembly or processing. The imports listed in category 4 also may remain in the country as long as the program is still authorized, but for a period not to exceed twenty years. Beginning in the year 2001, the Mexican government will remove all restrictions on maquiladora sales in the domestic market. Maquiladoras must report domestic sales on a bimonthly basis as provided in regulations of the Ministry of Commerce.
Domestic sales have important tax consequences.
When a maquiladora sells products in Mexico, it is subject to the general import duty on the foreign parts and components originally imported duty free. The maquiladora program allows inputs to be imported duty-free and processed in Mexico as explained above. The maquiladora entity in Mexico is subject to an income tax on its profits as normally determined. In practice, many maquiladoras reported minimum profits but, at present, tax legislation has been enacted to regulate transfer pricing between affiliates. A foreign vendor can sell goods or services in Mexico directly through its own employees.