Norms And Policies Of Mexico For It Industry

Published Date: 02 Nov 2017

The documentation requirements for the import of most IT products include (see definitions below):

- Certificate of Origin

- NOM Certification

- Labeling Requirements

THE REQUIREMENTS AND REGULATIONS FOR IMPORTING ARE STILL EVOLVING UNDER NAFTA.

It is the responsibility of the importer to define what certificates are required and from whom to obtain them. The Mexican government strictly enforces all customs regulations, particularly when it comes to potentially under-valued Asian-origin goods.

CERTIFICATE OF ORIGIN:

A certificate of origin is required from all foreign suppliers or exporters. If the product qualifies as North American in content, the exporter must use the NAFTA Certificate of Origin in order to benefit from preferential treatment under NAFTA. This document may be issued by the exporter or broker and does not have to be validated or formalized.

NORMS OF CERTIFICATION:

(Norms Officials Mexicans - Mexican Official Standards). Mexico has mandatory standards, called NOMs, that certain products must meet. Most IT products are subject to NOM-019-SCI-94 (security requirements) and NOM-024-SCI-94 (commercial information, instructions, and guarantee criteria for electric and electronic products).

LABELING REQUIREMENTS

Information Technology products are required to have a label in Spanish. Listing the required information in Spanish on the shipping container will satisfy the labeling requirement. This labeling requirement is continuously evolving. The Spanish information on the box must contain, at a minimum, the following information:- Name and address of the importer

-Importer's Ministry of Finance Taxation Number (RFC number and/or their Industry Association registration number)

-Exporter's name and address

-Trademark or commercial brand name of the product

- Product description whenever the product is packaged in such a form that it is not visible to the consumer

- Use, handling, and care instructions for the product, as required

- Country of origin

The participation of a customs broker is not obligatory for imports if all legal and technical requirements are met. However, the participation of a customs broker is suggested when the exporter is not familiar with the Mexican standards and customs processing procedures.

4.1.2 SOFTWARE: DUTIES and TAXES, UPDATES, LICENSES, ELECTRONICALLY DELIVERED

DUTIES

To identify the duties and taxes it is first required to know the medium in which the software is presented in order to correctly classify the import for customs purposes. However, the duties and taxes are assessed on the declared value by the importer of record (in other words, the value of the intellectual property). The import duty is calculated on the U.S. plant value (invoice) of the product plus the inland freight charges and any other costs listed separately on the invoice and paid by the importer, such as export packing.

Although the above is true of most software imports into Mexico, the duty for software (both packaged and customized) imported from NAFTA countries (the United States and Canada) is zero if a Certificate of Origin is presented.

TAXES

Software imports are subject to a 15 percent Value Added Tax (VAT, or IVA in Spanish) of the CIF invoice value and the Customs Processing Fee (CPF). The CPF in Mexico is approximately US$13, and it is assessed on the invoice value. However, as of July 1, 1999, definitive imports with a certificate of origin from NAFTA countries are no longer subject to payment of the CPF.

CUSTOMIZED SOFTWARE AND ITS RULE

Customized software is not treated differently than packaged software if a physical medium is involved. However, it is important to mention that customized software is often times considered under the category of consulting services. Consequently, there is no physical importation involved.

IMPORTS OF SOFTWARE UPDATES

Any update shipped at a later date than the original shipment is subject to the same import duties and VAT as any regular importation. If the original invoice and shipment clearly specifies that updates will be shipped later, but the cost of the updates is included in the invoice, the update shipment will still be subject to the VAT. It is common to include the cost for the updates in the original invoice and send the updates via Internet in order to avoid paying duties and taxes, but the importation must be declared in any case.

SOFTWARE LICENSES: CUSTOMS CLASSIFICATION, IMPORT DUTIES, TAXES, OTHERLICENSES

Software licenses are classified under Harmonized System Code 8524.9101.

Import duties/taxes applied

The same import duties and taxes mentioned in A and B above apply if the licenses are not included in the original shipment and invoice.

Other additional taxes applied on software licenses

If the software is registered with the Mexican Institute for Industrial Property (IMPI-Institute Mexican de la Provided Industrial), then there is a legal protection in Mexico, and the local law will apply in case of license agreement infringement. Note that registration with the IMPI is not mandatory. The IMPI has an ongoing inspection program, called "Zero Tolerance," in which the IMPI confirms that users have the corresponding licenses.

SOFTWARE DELIVERED OVER THE INTERNET/ELECTRONICALLY DELIVERED SOFTWARE

Taxes applied to software delivered to the end-user over the Internet

There is no special tax for software purchased/delivered over the Internet. The same import duties and taxes apply if the importation is registered with the Mexican authorities, even though the physical product is not presented. However, since there are no regulations to register software delivered over the Internet, this is not a common practice. There is no documentation requirements for the electronically delivered import of digitized products (i.e. software, movie downloads) over the internet or other networks

IT SERVICES: TAX TREATMENT AND OTHER REGULATIONS

TAX TREATMENT

Training, set-up, maintenance, or other services related to the sale of software are not subject to any type of tax unless an invoice is provided. If an invoice is provided, the local company is subject to the 15-percent VAT and an approximate 30-percent income tax (Impuesto Sobre la Renta – ISR).

OTHER RULES

1. U.S. IT solution providers permitted to send personnel into the country to set up hardware/software-related systems.

2.There are no visas or work permits required for qualified U.S. solution providers to set up hardware/software related systems in Mexico.

EREFURBISHED, USED, OR REPAIRED COMPUTER EQUIPMENT IMPORTS

1. REFURBISHED COMPUTER EQUIPMENT

Refurbished or used computer hardware equipment cannot be imported into Mexico. Exemptions may apply for equipment that is NOT manufactured in Mexico. However, a previous import permit from the Ministry of Economy is required, which is extremely difficult to obtain and, from a practical standpoint, not a recommended approach. It should be noted that there are very few computer hardware products not already manufactured in Mexico, and thus very few products would qualify for an exemption.

Donations of refurbished/used equipment are authorized if the proper documentation to prove the donation is submitted. Equipment to be donated also requires a previous import permit and needs to comply with the NOMs mentioned above. In practice, it is very difficult to meet the requirements for even donated used equipment.

Annex 3081 of the NAFTA states that the liberalization of refurbished/used computer equipment may occur in 2004. That said, there is no obligation to liberalize the importation of refurbished/used computer equipment. In fact, many industry analysts believe that the Mexican government will not liberalize this market in 2004 due to opposition of the many large computer manufacturers in Mexico .Re-furbished toner cartridges can be imported into Mexico.

2.REPAIRED COMPUTER EQUIPMENT RULES ON RE-IMPORT OF REPAIRED COMPUTER EQUIPMENT

This process requires the services of a customs broker. When sending the equipment back to the United States, the customs broker will process a temporary "pedimento de exportación" (export permit), in which it must be clearly stated that the equipment will be repaired or substituted. This document must accompany the repaired or substituted equipment when entering Mexico. The equipment is subject to import duties and VAT assessed on the value of the repair service and not the equipment. If the equipment is covered by a guarantee program, a copy of the guarantee statement must accompany the equipment when it is returned to Mexico in order to avoid the imposition of import duties and VAT.

4.1.3 OVERVIEW OF CURRENT LICENSING REGIME

The current licensing scheme for the provision of information and communication technology (ICT) services in Mexico is based on concessions and permits. The scheme is formally devised in the Federal Telecommunications Law (FTL) of 1995, which also established the sector regulatory framework and liberalized the market.

The Government started issuing concessions for local and long distance services in 1996, when the exclusivity period granted to TELMEX, the incumbent operator, expired. For cellular service, the Government introduced limited competition in 1990; it divided the country into nine regions – each comprising two or three major urban localities – and issued one concession per region to each of the two cellular operators. Later on, in the period 1996-1998, the Government auctioned additional frequency bands and issued concessions for fixed and mobile wireless telephone services. Currently, the Federal Telecommunications Commission (COFETEL) is auctioning additional frequency bands for PCS, trucking and the 77° West satellite orbit.

Concessions and Permits

In Mexico, a concession title is a license given by the Government to the holder that grants the right to exploit national resources and operate services, subject to certain terms and conditions. A concession is required to install, operate or exploit public telecommunication networks, to use or exploit radio frequencies, to exploit geo-stationary satellite orbits and orbital positions, and to exploit the transmission and reception of foreign satellite signals.

Concessions for the use or exploitation of radio frequencies and for exploitation of satellite communications are awarded by public auctions, whereas concessions for public telecommunication networks are issued upon request and are valid only for the services specified in the concession title.A concession is not required for resellers that do not own transmission facilities but wish to offer.Telecommunication services by using the network capacity of a concession holder. In this case, the reseller must obtain a permit from the Secretariat of Communications and Transport (SCT). Similarly, the installation and operation of earth transmission stations requires a permit although, according to the law, a waiver can be issued if technical norms are followed1.

The SCT has not yet issued permits to resale other services, only for payphones Value-added services, including Internet access, are defined as those transmitted using a public Telecommunication network with effect on the format, content, code, protocol and storage of information. To provide them, only a registration with the SCT is required.

On the other hand, installing or operating private telecommunication networks does not require a concession, permit or registration, unless radio frequencies are used. The SCT has authority over all concessions and permits and reviews the application process. However, it is COFETEL, the regulatory authority, who receives the applications. COFETEL is not embodied in the FTL and was created by presidential decree in 1996. In 2002, the National Congress proposed a new FTL that would give COFETEL, inter alia, complete control over permits and registrations. There are no limits to the number of concessions or permits.

However, only Mexican nationals can obtain them and foreign ownership is restricted to 49 per cent, except in the case of cellular mobile telephone service, where full ownership is permitted.

Fees and Guarantees

There are no fees charged on concessions for wire line public telecommunication networks. The applicant is only required to submit a guarantee to ensure compliance with the concession obligations. Guarantees have to be submitted at the time the concession is issued and must be updated annually according to the National Consumer Price Index (INPC). The amount varies depending on the number of local service areas where the concession holder may provide the authorized services, and of the service itself. In 2004, the guarantee for a national concession for wire line, wireless or long distance telephone service was 14 million MXN (USD 1.2 million); the guarantee for an interstate concession for cable television was 4.9 million MXN (USD 430,000).

4.1.4 Application Process

The application process for a concession or a permit is identical. The law requires the SCT to resolve applications for permits in 90 days, for public telecommunications in 120 days, and for radio frequencies in 180 days. However, an incomplete application could delay the process for up to a year. Applicants for a concession need to submit complete documentation that includes: technical specifications, such as description of the equipment and technical standards; commitments in terms of local service areas that will be served; investment to be made; quality standards; and a comprehensive business plan that contains financing and marketing programmers, revenue forecasts and details of employment and training programmers.

Policy environment

For a long time, Mexico has recognized the strategic character of Information and Communication Technologies (ICTs). To achieve the advantage of these technologies, the former administration prepared the Informatics Development Programmed 1995-2000, which has been established as a reference frame for the efforts made in this area.

This Programmed derives from the Democratic Planning System of National Development which determined the integration of the National Development Plan, establishing the elaboration of Sector, Region, Institutional and Special Programmes. Within the last category, there is a reference to the priorities of the Integral Development of the Country and the Informatics Development Program was published.

The goals reached surpassed the aims of this Program. The change of Government in December 2000 involved the revision and redefinition of public policies. Therefore, there has been a process of preparing a new promotion program, to use and exploit these technologies with the objective of channeling the efforts made by the sectors with relation to ICTs. This process considers that the main objective is the use and benefit from the solutions based on the technology and not the technology by itself, and that the ultimate objective is the use of knowledge and information.

Moreover, its guidelines are:

− Education, Science and Technology

− ICT industry

− ICT applications

− Operating Infrastructure

− Implementation mechanisms

− Socio-economic context -digital divide

This process is aligned with the strategic project called "e-Mexico System". This is a national system with the aim of ensuring that most of the population has access to the new technologies and is comprised of four inter-related chapters: 1.- Interconnection and Technology 2.- Programs and Content 3.- Legal Framework and Tariffs 4.- Administration and Management. Furthermore, the e-Mexico System integrates four sub-systems: e-Government, e- Education, e-Health and e-Commerce.

It Is important to mention that the e-Government sub-system provides the strategic framework for innovation within the Federal Government. The aim of this project is the setting up of a modern electronic 2 government which offers broad and timely access to quality information and services through efficient procedures and high responsiveness to citizen. Some of these benefits include: personalized service, reduction of distances and time, higher productivity and efficiency, transparency, feedback, integrated services supply, and improved budget management. The Mexican Government has defined the guidelines for action in terms of policies for the reduction of the "digital divide". Significant efforts have been made and although these were not always co-ordinate, they did share an integrated vision at the strategic level covering the following three aspects:

_ Infrastructure: computer equipment and Internet connection availability.

− Information proposals: development of sites which contain relevant national content in Spanish.

− Cultural change with mechanisms to strengthen the use of formal information for decision-making.

In general terms most government institutions and dependencies are connected to the Internet: 16 of the 17 State Secretariats of the Federal Public Administration have an Internet site which describes and allows the citizens to undertake some procedures. Moreover, these sites offer general information such as organizational chart, staff directory, main activities of the Secretary, and information concerning its activities.

All 32 federative entities have a web site, on which citizens can consult information related to the different economic activities of each State, its industry, main tourist places, state administration and procedures. With regard to government bodies and entities, the Internet site of the Presidency of the Mexican Republic, reports that 97 of them (or 31% of the total) have a web site. On these sites one can find information about their attributions and faculties. The web site of the Presidency contains the links to the above-mentioned web sites

Mexican Import Duties

Mexico imposes tariff and duties on imported goods. The amount of duties and tariffs that are charged depends on the type of good that is being imported and who the importer is Goods must a accompanied by specific documentation and a licensed customs broker must submit the customs declaration. (dutymexico.com, 2009 - 2012)

Trade Agreements

Goods which are produced in either Mexico, the United States or Canada will not have import taxes levied on them by Mexican authorities. This is in accordance with the North American Free Trade Agreement (NAFTA). Any goods that do not have visible evidence of where they were produced are also exempt under this act. Mexico also has specific trade agreements with reduced tariffs for goods produced in Bolivia, Canada, Chile, Colombia, Costa Rica, El Salvador, the European Community, Guatemala, Honduras, Iceland, Israel, Liechtenstein, Nicaragua, Norway, Switzerland, Uruguay, the U.S. and Venezuela. (Agreements M. T., 2010)



Duty Rate & VAT Calculation

Goods imported to Mexico are subject to an eight-digit classification system, which determines the duty rate and establishes any applicable non-tariff barriers such as quotas or other restriction. this applicable duties and taxes can be paid at 163 commercial banks locates at the Mexican port of entry .A value added tax (VAT)is also added by Mexican authorities which is normally 15% of the value of the goods. (Agreements, 2010)s

4.2 NORMS AND POLICIES OF INDIA FOR IT INDUSTRY FOR IMPORT/EXPORTS

Indian Government has set up the Software technology Parks of India (STPI) in the year 199, in order to promote the software Exports. STPI renders various services to Software Exporting Communities. This service includes data communication servers, incubation facilities, training and value added services.STPI is key accelerator for SME‘s and startup units for software exporting. This scheme was Successful in upbringing the software industry. Total Exports madeby STPI registered unit during 2008-09 were Rs.215571 crore which is about90% of total software exports from the country.

51 STPI centers were established up till now, since the inception of the STPI

scheme. These centers were establish to boost up the IT and ITES exports.

Various exemptions were provided to STPI Units, this includes exemptions fromservice tax, and rebate from central sales tax and most important incentives was 100% exemption from income tax on Export profit. This exemption was endedon 31st march .STPI scheme allows software firms to establish their operations in the cheapest locations to plan their investments according to need of business.

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Benefits under STP Scheme:

Income Tax benefits under Section 10 A& 10 B of the IT Act up to 31st March

2011.

~Full Exemption on customs duty on Imports

~Full Exemption from Central Exercise on indigenous procurement

~All relevant equipment / goods including second hand equipment can be

imported (except prohibited items).

~Sales in the DTA up to 50% of the FOB value of exports permissible.

~Use of computer imported for training permissible subject to certain conditions.

~Depreciation on computers at accelerated rates up to 100% over 5 years is

Permissible.

~Computers can be donated after two years of use to recognized non-commercial.

~Educational Institutions/Hospitals without payment of duty.

~Export proceeds will be realized within 12 months.

~Units will be allowed to retain 100% of its export earnings in the Exchange

~Earners Foreign Currency Account (EEFC) account.

DUTIES AND TAXES ON SOFTWARE IMPORTS DUTIES

There is no import duty/customs duty on import of software in India. However, if the software is embedded or pre-loaded on equipment, then the value of the software, if invoiced separately, is added to the valuation of the equipment for purposes of customs duty. If not invoiced separately, it would be assumed to be included in the price of the equipment package.

TAXES

Taxes are charged on the value declared in the invoice. For example, if the value in the invoice is USD 100, taxes will be levied on the said amount.

Types of taxes: An Excise Duty and a Countervailing Duty (CVD equivalent to the rate of the Excise Duty levied on imports) are levied centrally (by the union or the Federal Government); the current rate is 12.36%.

However, other local taxes, such as sales taxes, are levied by India's 29 states at a particular state's announced rate. Typically, most Indian states levy sales taxon It products at 4%

SOFTWARE LICENSES: CUSTOMS CLASSIFICATION, IMPORT DUTIES, TAXES, OTHER

LICENSING

The HS number for Software Licenses in India is 49070030.

IMPORT DUTIES/TAXES APPLIED

A software license is treated at par with software and thus is also duty-free.

other additional taxes applied on software licenses

not applicable. the U.S. license is recognized and binding in India. U.S. laws would pertain.

SOFTWARE DELIVERED OVER THE INTERNET/ELECTRONICALLY DELIVERED SOFTWARE

No taxes are currently levied on software downloaded from the Internet. Recently, as of May 16, the Central Government has proposed to levy a service tax at 12.36% on the development of customized software, or download of all software; the ambiguity in the law does not exclude packaged software, which is already subject to excise duty/CVD from ambit of new service tax levy, giving rise to concern about double taxation. India does not currently have a value-added tax (VAT). Software does not attract Excise Duty or a Countervailing Duty. However, certain Indian States charge a Local Sales Tax on sales of software (see above). documentation is not required for the electronically delivered import of digitized products (i.e. software, movie downloads) over the Internet or other network an electronically delivered software import IS NOT accompanied by a physical shipment of the same product

IT SERVICES: TAX TREATMENT AND OTHER REGULATIONS

All services, including IT training attract a service tax of 8 percent. Specifically related to this question, 'information technology service' includes any service in relation to designing, developing or maintaining computer software, or computerized data processing or system networking, or any other service primarily in relation to the operation of computer systems.

U.S. IT solution providers ARE permitted to send personnel into the country to set up hardware/software-related systems . Work Permits issued from the Indian Embassy/Consulate in the U.S. are required. However, if a person comes to India on a business/tourist visa and then decides to work, then he/she can apply for a work permit with the Ministry of Home Affairs, Government of India.

REFURBISHED, USED, OR REPAIRED COMPUTER EQUIPMENT IMPORTS

1. REFURBISHED COMPUTER EQUIPMENT

The import of refurbished or second-hand computers and parts is not permitted in India.

2. USED COMPUTER EQUIPMENT

The import of used computer hardware, parts, and accessories (including toner cartridges)is not permitted

3. REPAIRED COMPUTER EQUIPMENT

Import duty is assessed on the cost of repair only provided the same part is returned after repairs, as the serial number is matched. If a replacement is sent (new part), then the import duty is levied on that part, and CVD (tax) is also levied. However, since most repairs are done to equipment that has already been sold/paid for, local taxes (levies) are not charged.