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The VAT and excise tax certificate was introduced in 2015. The main objective of VAT and excise certification is to keep paying VAT on temporary imports. Companies that benefit the most are those with VAT credits granted under the IMMEX (Manufacturing Industry, Maquiladora and Export Services) program.
The Mexican Tax Administration Service (SAT) has also put in place a system to monitor and control the VAT credits applied to these temporary imports (Appendix 31).
Appendix 31 works with the most basic control of debits and credits using a strict FIFO method (first-in, first-out) and is linked to the tariff code declared for raw materials. Thus, a credit is obtained when a temporary IMMEX import is performed and a charge is applied when these goods are exported.
As a result, importers applying for temporary import credit are required to submit a detailed operational report on a monthly or bi-monthly basis, which creates an additional administrative burden. Before the introduction of VAT and excise tax certification, these activities were managed internally by IMMEX companies. It was therefore not necessary to submit an incident report to the authority, unless it was exercising powers of investigation in customs matters.
Administrative challenges according to Appendix 31
Since July 2020, some challenges have been identified in the management and updating of Appendix 31. Due to the lack of exports and some changes in legislation due to the COVID-19 pandemic, there were some discrepancies in the submission of the operational reports Receiving results such as an unidentified tariff code, no outstanding balances or the status “invalid” reflected in the system (which leads to a possible suspension of the VAT certification benefit).
In February 2021, the balances in Appendix 31 were updated. However, many problems have been identified by taxpayers. Most notably, the original inventory was not affected, which means that some overheads have emerged. This information has been updated to take into account the last six years of operation, so importers need to be ready to clarify any requirements from customs authorities.
Additional changes have recently been made to all of these systems, such as: B. the shortening of the statutory period from 36 months to 18 or six months. Therefore, the customs compliance teams should now be aware of and properly apply any adjustments to comply with customs obligations. Avoid additional requirements and / or checks related to the correct management of the VAT credit and IMMEX program.
Recommended analysis
The best practices in Appendix 31 of the administration prescribe frequent coordination with the inventory control system for customs purposes (ICS or Appendix 24), which can also achieve the inventory.
The administrative burden of recent amendments to the General Taxes on Imports and Exports Act (LIGIE) means that a review of the update of the tariff codes for Annex 24 and Annex 31 must be considered in order to see any impact on the continuity of the law Avoid direct debit applications, which lead to a misinterpretation of the outstanding balances, which in turn affects the amount of VAT to be paid.
Carrying out such an analysis enables certified companies to meet their customs and tax obligations and, for example, to identify important deviations in the correct application of the insert as well as to identify missing processes to be reported and trend consumption in the correct order different KPIs for the management of Annex 24 and Establish Annex 31 or prepare clear answers when the authority questions the payment of certain VAT credits.
Active checking of the publications of the customs authorities also provides security when updating various databases, which avoids an additional risk of inaccurate management of all information.
Tere González
Associated partner
EY Mexico
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