R&D cash tax benefit available for 2010 / Mexico Tax Alert - 12 January 2010

Published martes, 12 de enero de 2010

By Alfredo Alvarez Laparte - DELOITTE

Even though the specific provision in the Mexican Income Tax Law was eliminated as part of the 2010 Federal Spending Budget and in accordance with the 2007-2012 Mexican National Development Plan, funds have again been allocated to provide a tax incentive for investments in research and development (R&D), which will be assessed and granted by the National Council for Science and Technology (CONACYT). For corporations to qualify for the incentive, an application must be submitted no later than 29 January 2010.

The R&D incentive has been granted in cash since 2009 and can represent between 22% and 90% of eligible R&D expenses paid by the Mexican company, depending on the category and form of participation. In general, the lower range of eligible expenses applies where work is not performed in conjunction with a research center or higher education institution. Company expenses may be deducted at higher amounts if the work is performed in conjunction with the research centers/universities, but the maximum eligible percentage is reserved for expenses incurred by the research centers/universities.

Eligible companies will be engaged in activities related to technological investigation, development or innovation, including in conjunction with other entities or higher education institutions or research centers and institutes. Eligible expenses are in the nature of expenses involving research centers or higher education institutes; project salaries; personnel travel expenses; expenses incurred to register intellectual property rights; technological studies, analyses, etc.; certain scholarships; infrastructure creation expenses; and prototypes, pilot models and their evaluation, among other expenses.

There are three application categories:

INNOVAPYME - High Added Value Technological Innovation for TRDI (technological research, development and innovation) projects, granting economic support to micro, small and medium-size enterprises (MIPYMES) for activities preferably performed in conjunction with other companies or higher education institutions and research centers.
PROINNOVA – Development and Innovation of Precursor Technologies for TRDI, providing complementary support to MIPYMES or large companies. Proposals are required to be presented on a network basis and include at least two companies and two research centers/higher education institutes.
INNOVATEC – Technological Innovation to Enhance Competitiveness for TRDI, granting economic support to companies engaged in activities involving TRDI. Projects under this category are focused on infrastructure investments and the creation of new high-value jobs, with priority given to proposals involving research centers or higher education institutions.
Application requirements include a federal taxpayer registration number, current registration with the National Registry of Scientific and Technological Institutions and Entities and a declaration by the company’s legal representative that the company has complied with its federal tax obligations and has no outstanding debts with CONACYT, as well as documentation detailing the project.