VAT and IEPS certification: renew on time to keep the credit
The VAT-IEPS certification avoids paying those taxes on temporary imports, but it renews every year and within the 30 days before expiry. What sustains it and what happens if it lapses.
FiscalWhat the certification is for
The VAT and IEPS certification allows companies with temporary import operations to apply a tax credit equal to 100% of the tax that such an import would trigger, instead of paying or guaranteeing it. For a maquiladora or an IMMEX company it is a considerable cash-flow benefit, because it avoids tying up resources in taxes that would otherwise be paid on each operation and recovered later.
What it rests on
The basis of this mechanism is Article 28-A of the Value Added Tax Law and Article 15-A of the Special Tax on Production and Services Law. Its operational development is in Title 7 of the General Rules of Foreign Trade, which governs the company certification scheme: rule 7.1.2 sets the requirements, 7.2.1 the obligations and 7.2.3 the renewal, with procedure sheet 153/LA. It is worth clarifying that Annex 31 is not the basis of the certification, as is sometimes assumed, but the control system for credit and guarantee accounts where the associated tax credit is managed.
Renewal has strict deadlines
Renewals of the VAT and IEPS modality are valid for one year, in any of their A, AA or AAA tiers. The request must be filed electronically within the thirty days before the registration expires, and at the time of renewal the company must have no overdue balances of the tax credit in Annex 31. These are deadlines that leave no slack: filing outside that window, or arriving with pending balances, complicates or prevents the renewal.
What happens if it is lost
If the certification is not renewed on time or the registration is cancelled, the company loses the 100% credit and becomes obliged to pay VAT and IEPS on its temporary imports, or to guarantee them through a bond or letter of credit. The effect on cash flow can be significant. In addition, the authority may start the cancellation procedure on its own initiative when it finds that the requirements are no longer met, so monitoring compliance continuously is as relevant as the renewal itself.
BG recommendations
- Note the thirty-day window before expiry well in advance; outside it, renewal gets complicated.
- Verify that there are no overdue tax-credit balances in Annex 31 before filing the renewal.
- Keep continuous track of the Title 7 requirements, not only as expiry approaches.
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