The Value Added Tax in Mexico and Nonprofit Organizations

27/02/2003

By Consuelo Castro
The value added tax in Mexico is charged for the performance of acts or activities. The value added tax rate is 15 percent. Thus, in accordance with the Value Added Tax Law (LIVA), certain activities are taxable, among them the following:

* Sale of goods.
* Provision of services.
* Temporary use of properties (renting).
* Imports of goods and services.

In addition to donations, non-profit organizations have other sources of income. This is the case of some institutions that sell goods or provide services for which they charge a minimum fee.

In the event that a non-profit organization conducts some of the above-mentioned activities (and which do not involve a donation or a service rendered free of charge), it should issue vouchers in which the 15 percent tax paid by those who acquire said goods or receive said services is clearly and separately indicated.

However, there are certain services provided by non-profit organizations that are exempt from paying Value Added Tax in our country according to Article 15 of the law, among which are the following:

* Services provided free of charge.
* Education in institutions officially validated or recognized by the Public Education Ministry.
* Services provided by associations or entities organized for scientific or cultural ends.
* Admission tickets for public events.
* Professional health services by individuals with a medical degree, be they provided individually or through a non-commercial partnership.

Additionally, in some cases and with previous authorization by the SAT, the merchandise donated by foreigners to authorized donation recipients is exempt from Value Added Tax charged for imports.

The following is the text of some of the provisions of article 15 related to non-profit organization services that are tax exempt:


Article 15.- This tax shall not be paid on the rendering of the following services:

III. Services rendered gratuitously, except when the beneficiaries are members, partners or associates of the entity rendering the service.

IV. Teaching services rendered by the Federal Government, the Federal District, the States, the municipalities and decentralized agencies, or by private establishments possessing official authorization or acknowledgment of validity of studies, as provide for the General Law of Education, an educational services at the pre-school level.


XXII. Services rendered to their members as normal compensations for their quotas, provide, that such services relate exclusively to purposes appropriate for.

a) Lawfully recognized political parties, associations, coalitions or fronts.

b) Labor unions, or organizations into which such unions are grouped.

c) Chambers of industry or commerce, groups for farmers, cattlemen, fishermen or foresters, or the organizations into which they are grouped.

d) Associations of employers or commerce, groups of farmers, cattlemen, fishermen or foresters, or the organizations into which thy are grouped.


XIII. Those of public spectacles, on the ticket pf entry (except tickets of entry to theaters or circuses), when the agreement with the States in which said spectacle in held or with the Department of the Federal District does nor comply with the provisions of Section VI of Article 41 hereof. The exemption provided in this Section Shall not be applicable to tickets of entry to cinematographic films.

Spectacles in restaurants, bars, cabarets, diner of ballrooms or nightclubs are not deemed public.

XIV. Professional medial services the rendering of which requires by law a degree in medicine, rendered by individuals, whether individually or through civil associations.

XV. Professional medical, hospital, radiology, laboratory or clinical study services rendered by decentralized agencies of the Federal Public Administration, the Federal District or the state or municipal governments.

For more information contact: Consuelo Castro, ccastro@cemefi.org

HacesFalta Cemefi

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