Mexico proposes regional VAT

A new budget presented to the parliament includes provisions to permit Mexican States to levy regional VAT on top of Federal VAT.

The Mexican VAT is currently 16%. The new package would allow an additional local consumption tax of up to 5%.

The ‘place of supply’ rules would mirror those of the European Union VAT system. The local tax would be incurred in the location of dispatch for goods, and the location of performance for services. Most financial services would be exempt from Local VAT.

The implementation date would be 2012. The final decision on approval of the proposal is with Congress.