Industrial Poles (Progreso I and Merida I): Boosting Investment and Growth
As part of the Mexican State of Yucatan’s Development Plan 2018-2024 to attract investment and strengthen regional economic competitiveness, the Industrial Poles Decree was published on June 27, 2024, in the Official Gazette of the Government of Yucatán. This agreement established designated industrial poles called Merida I and Progreso I (hereinafter, the Poles), located north of the municipality of Mérida and at KM 24.5 of the Mérida-Progreso highway.
On June 28, 2024, the Decree was published in the Federal Official Gazette, granting specific tax benefits to taxpayers engaging in industrial activities in the Poles.
The Decree applies exclusively to taxpayers involved in the following productive economic activities:
- Electrical and electronics
- Semiconductors
- Automotive (electromobility)
- Auto parts and transportation equipment
- Medical devices and pharmaceuticals
- Agro-industry
- Clean energy (power generation and distribution equipment)
- Machinery and equipment
- Information and communication technologies
- Metals and petrochemicals
Income Tax (IT) Incentive
The Decree grants a tax incentive to taxpayers consisting in a tax credit that can be applied against the amount of Income Tax (IT) incurred in the fiscal year. This benefit is available to both individuals and legal entities resident in Mexico, as well as foreign residents with a permanent establishment in the country, who obtain revenues from eligible productive economic activities carried out within the Poles. The tax credit will cover 100 percent of the IT liability for the first three fiscal years, starting from the year the taxpayer obtains a certificate issued by the Ministry of Finance and Public Credit (SHCP, per its acronym in Spanish) confirming the compliance with the Decree’s requirements. Additionally, for the following three fiscal years, the tax credit will cover 50 percent of the IT liability, with the potential to increase to 90 percent if the taxpayer exceeds minimum employment levels established by the SHCP.
In addition, for six fiscal years from the issuance of the certificate instead of applying the maximum allowable annual percentages established for every type of fixed asset under domestic law (tax depreciation), taxpayers may deduct 100 percent of the cost of the new fixed assets employed in productive economic activities within the Poles.
Income Tax Determination for Activities within the Poles
Taxpayers must calculate the IT owed for the fiscal year or monthly advance payments according to mechanisms set by domestic law. However, for these purposes, only revenues derived from productive economic activities conducted within the Poles should be considered, along with authorized deductions that are strictly necessary to obtain these revenues.
If taxpayers receive revenues from activities unrelated to productive economic activities, they must calculate the IT separately, without applying the tax credit referenced in the Decree.
Value Added Tax (VAT) Incentive
For a period of four fiscal years from the effective date of the Decree, a tax incentive is granted to taxpayers who carry out productive economic activities within the Poles. This applies to the sale of goods, provision of services, or leasing of goods to individuals or entities who are also engaged in productive economic activities within the Poles.
The tax incentive consists of a tax credit equal to 100 percent of the Value Added Tax (VAT) owed on the sale of goods, provision of services, or leasing of goods. This tax credit will be applied against the VAT due for these specified activities.
The tax incentive is valid only if no VAT is charged to the purchaser for the mentioned goods or services and provided that these goods, services or leased items are used and enjoyed by the purchaser in conducting productive economic activities within the Poles.
Requirements for the Application of Tax Incentive
Taxpayers who carry out productive economic activities within the Poles must meet the following requirements, among others, to qualify for the tax benefits in the Decree:
- Be in compliance with their tax obligations.
- Possess documentation granting rights to use and exploit and, if applicable, partial or total possession of the land within the Poles, through concession, leasing or other legal arrangements.
- Submit an investment project that supports the granted use, exploitation, or, possession rights.
- Establish their tax domicile within the Poles where their productive economic activities are carried out.
- Report the progress on the investment project to the SHCP and meet the minimum employment levels set by the SHCP, in accordance with the project and the economic activity performed.
Our team of experts is available to address any questions or comments you may have on the content and application of the Decree.
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