El Economista: 7% VAT payment under the Simplified Regime would be optional

Taxpayers under the Simplified Trust Regime (RESICO) could choose to pay an effective 7% VAT rate instead of applying the traditional mechanism, under the proposal included in the 2027 Economic Package.

The measure is part of the relief the federal government is proposing for micro and small businesses, through which the SAT expects to bring 1.6 million individuals and companies into the taxpayer registry. The option would apply to both individuals and micro and small businesses filing under RESICO.

President Claudia Sheinbaum explained that the proposal came out of dialogue with small businesses, which pointed to how long the accounting process takes to recover creditable VAT. The 7% corresponds, she said, to the average these businesses pay once what they recover is deducted.

Not a cut to the general rate

Pedro Canabal, Partner at Baker Tilly Mexico, clarified in an interview with El Economista that the measure should not be read as a reduction of the general VAT rate from 16% to 7% for micro and small businesses.

"It is a simplification option for certain taxpayers who, instead of entering the traditional mechanism of output VAT minus creditable VAT, could choose to calculate their payment directly by applying a 7% rate," he explained.

The specialist noted that the scheme would give taxpayers administrative certainty, since for many small businesses VAT compliance is costly even when the tax they handle is not large.

"An effective rate like this one could lower costs, make it easier to determine the tax and, along the way, help taxpayers avoid errors," Canabal said, stressing that the measure does not necessarily mean paying less because each case will be different.

The effect depends on each taxpayer

Javier de los Santos Valero, chair of the Tax Committee of the Mexican Institute of Public Accountants (IMCP), agreed that some taxpayers would pay less under the effective rate.

In the example he gave, a company with sales of one million pesos charges 160 thousand pesos of VAT and credits 60 thousand paid to suppliers, so it would remit 100 thousand pesos under the current mechanism. Under the effective rate it would pay 70 thousand pesos, 30 thousand less. He stressed that each taxpayer will have to assess whether it suits them, since the option would not be mandatory.

Other relief measures for RESICO

The 2027 Economic Package also proposes raising the regime's income thresholds: from 3.5 to 5 million pesos a year for individuals and from 35 to 50 million pesos for legal entities. It also contemplates allowing income tax and VAT to be paid in a single return.

RESICO was created in 2022 to simplify compliance for SMEs and individuals, with income tax rates between 1% and 2.5% and automated returns. It currently covers 4.18 million individuals and 254,278 companies, according to the SAT.

At Baker Tilly we support companies in analyzing the 2027 Economic Package bills and in assessing the tax regime that best fits their operations.

Article originally published in El Economista, by Sebastián Díaz Mora.