One of the most important questions that Mexico, Tacna manufacturing companies face is that of whether to locate their factories in Mexico or on U.S. soil. The answer is both, “no”. There are several reasons why manufacturing plants have been established on U.S. soil instead of Mexico soil but the most important reason of all is the tax benefits of doing business in Mexico. In this respect the benefits of manufacturing in Mexico are many. These benefits include a lower cost of production as the products are purchased under the trade agreement between the U.S. and Mexico and then re-sold between the countries duty free.
Also on the list of tax benefits of manufacturer in Mexico is the opportunity for a greater flow of labor and technology to the United States. The low cost of living in Mexico relative to the United States helps the manufacturer to locate his plant in Mexico and this leads to the need for cheaper workers in Mexico, allowing wages in Mexico to be more competitive. Additionally, when you add the opportunity for a new, cheaper consumer market to the mix; this leads to an increase in the demand for products from Mexico, leading to more jobs in Mexico and greater profits for Mexican businesses. There are additional tax benefits of manufacturer in Mexico that lead to greater investment opportunities.
There are several tax benefits of manufacturer in Mexico that lead to increased profits. One of the largest benefits is depreciation allowances. When you purchase a factory in Mexico it is considered an investment and there is a tax relief provided that the plant is used solely for manufacturing purposes. Depending on the nature of the equipment in your plant you may be able to depreciate the plant over its estimated useful life, up to 25 years. This can lead to significant savings on taxes.
Other tax benefits of manufacturer in Mexico includes foreign research and experimentation tax credit. When a U.S. company manufactures in Mexico they are allowed to submit a grant request to the government for research and development expenses related to the proposed facility. Once approved the government will provide a sum of money to the manufacturer for the expenses. These benefits are not available for all manufacturers. In order to qualify for the benefits, you must demonstrate to the government that the proposed site will result in the creation of jobs. You must also explain how the jobs will generate sufficient revenue to support the costs associated with building and maintaining the plant.
Tax benefits of manufacturer in Mexico are not only available for the initial investment but can also be obtained through expansion. If a manufacturer wants to expand into a facility they can apply for additional tax credits for the additional space needed. In addition to the available tax credits for expansion there are also incentives available to buy new machineries or hire additional personnel to work at the expanded plant. The incentives are designed to help keep the plant operational and create jobs in Mexico.
Tax benefits of machineries in Mexico are also available to American companies wishing to purchase older machineries in Mexico to take advantage of the lower pricing on many older types of machineries in Mexico. Many of these American companies that purchase these older machineries in Mexico do not realize the benefit of the depreciation allowance available to them. These businesses may purchase these machineries knowing that they are still worth something in the United States. By investing in machinery in Mexico they can realize the benefit of the lower pricing on these machineries.