The start of Donald Trump’s second term in office on January 20, 2025 has provoked diverse reactions in Mexico, particularly because of his plans to implement aggressive policies on trade, immigration and border security. On the trade front, Trump has proposed stricter measures, such as the possible imposition of tariffs on Mexico.
What is Plan Mexico?
Plan Mexico responds to the policies announced by Trump and seeks to establish a joint strategy between the government and the private sector to attract investment, diversify export markets and strengthen trade relations with other regions, reducing dependence on the United States. It aims to make Mexico a more attractive destination for investment, promoting import substitution and favoring domestic production through incentives for companies to set up and operate in the country.
Objectives of Plan Mexico
Plan Mexico establishes clear goals towards 2030, such as guaranteeing adequate infrastructure to attract global investment, strengthening productive chains, and increasing domestic content in key sectors such as the automotive, space, energy and electronics industries. The plan also seeks to consolidate Mexico among the world’s top 10 economies, create well-paying jobs in specialized manufacturing and innovation, and cut red tape in half through a digital one-stop shop to streamline investment.
Priority projects of Plan Mexico
Plan Mexico includes priority projects in the following areas:
- Water
- Infrastructure
- Connectivity
- Highways
- Electricity generation
- Housing development
- Education
- Simplification of procedures thanks to Llave MX
- National security strategy
- Labor welfare
The Isthmus Corridor in Plan Mexico
To achieve the goals of Plan Mexico, the government headed by Sheinbaum relies on various development policies and programs, one of which is precisely the Interoceanic Corridor of the Isthmus of Tehuantepec, which is part of “Plan Mexico”.
The government seeks to consolidate the Isthmus Corridor as an alternative to the Panama Canal to connect Asia-America-Europe and to serve as a platform for nearshoring. Especially in view of the current drought faced by the Panama Canal, which limits the transit of ships.
The current government hopes that the incentives offered by the Isthmus of Tehuantepec Corridor, combined with its geographic location that favors the inter-oceanic mobilization of goods, will generate investments from companies interested in this project, which comprises more than 300 kilometers of railroad tracks that go from Coatzacoalcos, Veracruz, to Salina Cruz, Oaxaca.
Tax Incentives in the Isthmus Corridor
In order to promote development and investments in the Isthmus Corridor, the federal government established benefits in the Decree published in the Official Gazette of the Federation on June 5, 2023. In essence, companies that set up, invest and obtain income from specific industrial parks in “welfare development poles” will enjoy tax exemptions or incentives, consisting of a tax credit creditable against the amount of Income Tax, as follows:
- Tax credit or stimulus of 100% of the Income Tax for three fiscal years.
- Tax credit or incentive of 50% of the Income Tax in the following three fiscal years. However, if the minimum employment levels determined by the Ministry of Finance and Public Credit are exceeded, the companies will be able to enjoy a tax credit of 60% to 90% of the Income Tax in such fiscal years.
- Immediate deduction of 100% of the original amount of the investment of new fixed assets during six fiscal years, except for certain assets, such as office furniture and equipment, automobiles, armored automobile equipment or any other fixed asset not individually identifiable.
- Tax credit for four years equivalent to 100% of the Value Added Tax payable on the sale of assets to taxpayers with productive economic activities in the development poles.
The tax incentives will not be considered as accruable income for income tax purposes.
The SAT will also grant facilities to expedite the transportation of goods for foreigners without presence in Mexico. For example, a generic Tax Id (RFC, acronym) may be granted to foreigners, which will prevent them from needing to obtain a Tax ID if they only cross goods through the Isthmus Corridor.
Welfare Development Poles?
As noted, companies that seek to enjoy from these tax incentives must invest in specific industrial hubs called “welfare development poles” (in Spanish Polos de Desarrollo de Bienestar. The Government of Mexico has issued the following declarations creating such “Welfare Development Poles”:
How to qualify for tax benefits in the Isthmus Corridor?
The Ministry of Finance and Public Credit issued the guidelines to grant tax incentives to companies with economic activities within the “Welfare Development Poles”. Some of the requirements, among others, are the following:
– The Ministry of Finance must issue the certificate evidencing compliance with the requirements, prior opinion issued by the general director of the Interoceanic Corridor of the Isthmus of Tehuantepec.
– To apply the 100% for the income tax incentive, the applying company will have a term of three fiscal years, from the date of obtaining the certificate, to prove that it met the stated number of jobs in its application.
– To apply the income tax incentive of 50%, the company will need to prove that the number of jobs (permanent labor contract) are met at the third fiscal year as stated in the new investment project.
– To apply the tax incentive higher than 50% and up to 90%, the company must annually prove from the fourth and up to the sixth fiscal year that it has exceeded the number of jobs (permanent labor contract) as of the third fiscal year as stated in the new investment project.
Also, the investing companies must meet the following requirements:
- be up to date in the fulfillment of their tax obligations;
- have a current concession title or be the owner of an area within a Development Pole;
- submit, if applicable, the investment project for which the concession title was granted; and,
- have their tax domicile in the Development Pole where they carry out their productive economic activities.
To maintain the tax benefits, the investing companies must submit advances in the referred investment project and comply with the minimum employment levels determined by the Ministry of Finance. Furthermore, we note that the Government of Mexico will authorize companies seeking to invest in the following economic sectors:
- Electrical and electronics;
- Semiconductors;
- Automotive (electromobility);
- Auto parts and transportation equipment;
- Medical devices;
- Pharmaceuticals;
- Agribusiness;
- Electric power generation and distribution equipment (clean energies);
- Machinery and equipment;
- Information and communication technologies;
- Metals and petrochemicals; and
- Any other sector not listed as determined by the Governing Board of the Inter-Oceanic Corridor of the Isthmus of Tehuantepec for the Development Poles for Wellbeing, in terms of the applicable legal provisions.
When taxpayers fail to comply with any of the requirements set forth in the guidelines, the tax benefits and administrative facilities will cease to apply as from the time of the non-compliance.
New decrees for relocation of companies and Welfare Poles
The government plans to follow the example of the Isthmus Corridor and in January 2025 plans to publish a new decree on the relocation of companies, in which it will announce incentives for those who participate.
Likewise, in February it is expected to publish an additional decree that includes at least one development pole per industrial corridor, which is also expected to detail the incentives and requirements for investors.
Will the government’s tax incentives and administrative facilities be enough to promote investments?