Navigating the Value-Added Tax

We've now been in Mexico City a week and still working on working through check-in procedures. This included submitting paperwork for diplomatic accreditation and a housing walk-through today.

One of the privileges of diplomatic status or "perks," if you will, is being able to recover some of the value-added tax paid each month. In Mexico, the value-added tax is applied to most services and products, but some things, like food and medicine, are currently exempted. Because the tax, called "IVA" (and pronounced a lot like the name Eva), is currently levied at a rate of 16%, this can add up to a lot of money. Of course, there are some restrictions, like you have to spend more than $50 on certain categories of purchases in order to be able to recover any of the tax for those purchases, but for some things, like gasoline and tolls, there is no minimum expense.

Part of the check-in process included an explanation on how to submit for IVA reimbursement. There is a good bit of paperwork that is involved; nevertheless, it sounds like the work will be worth it.

In order for a purchase's IVA to be reimbursable, the purchaser must obtain a factura for the purchase. Some people translate factura as "invoice," but I don't think the word translates well, so I'll just call them facturas. Although it is a fairly common practice for businesses to provide facturas as they are required by the Mexican government for routine tax deductions, like for businesses, this is not the standard receipt (comprobante or recibo) that you receive as a matter of course. You typically have to specifically request a factura. Interestingly, sometimes facturas are printed on the same "register tape" kind of paper that common receipts are, but sometimes they are much more official looking. Thankfully, the process of receiving a factura is not nearly as onerous as it was in years past thanks to advances in technology. No more waiting in line in most instances. Larger businesses, especially chains, allow you to facturar (issue a factura or comprobante fiscal digital) via their websites. In order to create the factura, you just need to input some values from your paper receipt and add a specific Mexican tax code registered to the embassy. And then, voila, factura!

Let the record keeping begin!