Mexico automotive sector legislative and tax reforms

Mexican legislators have introduced measures to combat the illicit trade of automotive components. Federal deputy Ignacio Mier Bañuelos proposed reforms to the Federal Tax Code that would require sellers to maintain documentation proving the legitimate acquisition of parts and link serial numbers to inventory records. Non-compliance could result in fines between 40,000 and 90,000 pesos. Additionally, Sinaloa state legislators proposed encouraging citizens to use the Public Vehicle Registry to prevent fraud.

Following these developments, the Mexican Association of Automobile Distributors (AMDA) warned that modifications to the Income Tax Law (ISR) could jeopardize approximately 1,000 agencies and 70,000 jobs. The reform, designed to prevent fraudulent invoicing, limits expense deductibility to 96.6%. AMDA executive president Guillermo Rosales Zárate stated that the formula disproportionately affects low-margin businesses, noting that a 1% profit margin could result in a 100% ISR rate. The association has requested an executive decree from President Claudia Sheinbaum to address these specific business models and prevent the closure of up to 30% of member agencies.

In response to these fiscal tensions, the Mexican Chamber of Deputies is scheduled to analyze a proposed modification to the Income Tax Law (ISR) following changes made by the Senate. This reform, part of a broader fiscal package, includes a provision to establish tax exemptions for the terminal automotive industry. Senator Emmanuel Reyes Carmona noted the sector is a cornerstone of the economy, contributing up to 4% of the national GDP. The measure will undergo discussion in the Commission of Finance and Public Credit before moving to the lower house plenary session.