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January 29, 2019 Article 1 min read

Mexico's tax authorities have eliminated taxpayers’ ability to cross-offset taxes effective Jan. 1, 2019. Find out how this may negatively affect your international organization’s cash flow management.

Downtown business buildings in Mexico City.

A recent change in Mexico's tax regulations has eliminated an organization’s ability to offset different types of federal tax balances against each other (e.g., income taxes and value-added tax [VAT]). This was formerly known as universal compensation.

Beginning Jan. 1, 2019, an organization may only offset positive tax balances against amounts owed for the same tax. For example, an overpayment in VAT can only be recouped via an offset against future VAT withholdings, or the taxpayer can request a refund.

Prior to this change, an overpayment in one type of federal tax was eligible to be offset against amounts owed or withheld for another federal tax. Another example of this is an overpayment in VAT that could have been offset against an income tax payment.

This change may have a negative impact on your Mexican organization’s cash flows. For more information and to discuss how this may affect your organization, contact our international team.