SHELTER SERVICES IN MEXICO

1964 - Maquila Program: Predecessor to the Shelter Program

The Maquila Program was created in part to provide an avenue for U.S. manufacturers to invest in assembly factories on the Mexican side of the border. They were seeking to employ the available population of ex-farm workers returning to Mexico after the dissolution of the Bracero Program in the U.S. Maquiladora factories could import machinery and raw material to Mexico on a temporary basis, to be used in the manufacturing process and then subsequently exported back to the home market for sale, free from duties and tariffs.

1980 - The Shelter Program: Created to Assist Investors in Mexico

By 1980 the growth of the Maquiladora Program had created new business opportunities to serve foreign manufacturing operations in Mexico. Shelter operators in Mexico allow foreigners to invest and partner with Mexican service providers to operate in Mexico without the need to incorporate a legal entity.

Around this same time, Mexico introduced the Value-Added Tax (VAT) at a 16% rate upon repealing the Commercial Income Tax (CIT).

By 1984, foreign investors could be majority shareholders of a Mexican manufacturing entity, replacing the previous 49% limitation.

Mexico joined the GATT in 1986.

1994 - Successful NAFTA Implementation Drives Formality of the Shelter Program

In 1994, Mexico entered into the North America Free Trade Agreement with the United States and Canada. One year later Mexico joined the World Trade Organization.

By 1997, Mexico had aligned themselves with the OECD by implementing transfer pricing rules for maquila factories in Mexico. Shelter operators were exempt from paying income tax, and the value add of the service spurred a growth in shelter operations over the next decades in Mexico.

2006 - Creation of the IMMEX Program

In 2006 the Maquila Program was merged with PITEX, a program for domestic and export sales, to create the IMMEX Program. It was devoted to shelter service operators in Mexico.

In 2012, Mexico's Federal Labor Law was reformed to further formalize working relationships and regulate outsourcing.

2014 - Mexican Tax Reform Boosts Economic Modernity in Mexico

In 2014, the Mexican government introduced the concept of VAT Certification. This allowed maquiladora factories to continue temporary exports without paying taxes, but only after certification. Factories would pay the tax and await a reimbursement from the Mexican government.

Annex 24 was a system added at the same time, aimed at increasing the traceability of the temporary imports and exports.

About 2 years later, the exemption for triggering Permanent Establishment (PE) was extended an additional 4 years, as long as the company payed income tax in Mexico.

In 2019, Mexico underwent a revolutionary Labor Reform that strengthened a movement supporting the Mexican worker, and aligned Mexico to comply with initiatives central to the upcoming free trade agreement.

2020 - The Modern Shelter Program: A Focused Lense on Compliance

At the turn of the decade, the new USMCA (United States-Mexico-Canada Agreement) was signed and implementation had begun.

Mexico's 2020 Tax Reform required all foreign residents to obtain a tax ID in Mexico, triggering a Permanent Establishment (PE) for virtually all new operations, and despite previous benefits to the Shelter Program. The foreign resident was now subject to an income tax obligation in Mexico at the start of their operations, despite their previous exemption for up to 4 years.

In 2022, Mexico outlawed the option to pay income tax via Advanced Pricing Agreements (APA). Additionally, the Mexican government elongated the VAT Certification and reimbursement processes, and the Authorized Economic Operator (AEO) certification was added, aiming to boost fiscal, customs and security compliance.