End of "Paradise" in sight?

Last night I was in one of my favorite restaurants talking to the owner about his plans to close. That makes three of my favorite restaurants that are planning to close because of a new Mexican tax law. He claims it will raise his taxes by 16% and force him to get an official factura for every tax deductible purchase he makes. He also says he must use a new tax reporting software that he must stand in line for hours in Guadalajara to get. He also says he will have to raise his prices by 20% and he knows that it will not fly with his customers.

I don't know anything about this. But if it is true, I can see the end of the road to Paradise just around the corner. How in the world can any mom and pop operations continue to function? I can't imagine that a vegetable vendor or a chicken supplier is going to be able to cope with this. And I won't be surprised to hear that more of my favorite restaurants are going to close.

It sounds too insane - even for Mexico. Can anyone provide some accurate information?

Mexico seems to be getting the U.S. government disease. Restaurants aren't the only ones closing. There was a demonstration against these onerous laws in GDL a week ago that was reported in El Informador.

As I understand it, a "pequeño contribuyente" (small business owner) does not need a computer or software, but they do need to have an accountant.  Again, it is my understanding that an accountant can only charge 300p per month to a small business owner by law.  Taxes for a small business used to be less than 3%, while an SA de CV (corporation) like mine paid 15%, now 16% and a lot more to an accountant.  Everything was computerized at the accountant's office.  Facturas were only provided to people who paid the 15 or now 16% sales tax, had an RFC and requested the factura.  the same applied to us when purchasing for our business.

An interesting person to talk to about the "new" requirements is Gloria, the cook at Perry's Fish and Chips on Guadalupe Victoria, to the west of cross street Aldama.  Gloria is actually a small business advisor/consultant amongst other things, and very knowledgeable.  She also consults and designs and writes projects for/with ACs (community based organizations called Associaciones Civiles here, basically non profits).  

I've known her and her family....for years.  Her mother runs an AC in SJC, primarily for secondary and preparatory education, and small business development and credit projects.  Her brother is a well known writer, poet and head of cultura for Joco, and the oldest brother basically runs Mailboxes Etc lakeside and elsewhere.  

If I'm wrong please let me know....I just returned from a long sojourn and am only now bringing myself up to speed.  I do think there iris still a lot of misunderstanding re the "new" hacienda requirements.  How unusual for Mexico.....I'm going to go read the article in Informador mentioned by MC to see if it sheds more light on the issue.

What constitutes a small business ? Income or number of employees or what?
We have an accountant that we don't pay but trade services. I don't know much about the accounting end of things but I do know that we are in the 16% bracket and only my husband and myself (I am unpaid) work in the office. We have the facturas but haven't figured out how to do it yet.

Which 3 restaurants?

Ms.Thang wrote:What constitutes a small business ? Income or number of employees or what?
We have an accountant that we don't pay but trade services. I don't know much about the accounting end of things but I do know that we are in the 16% bracket and only my husband and myself (I am unpaid) work in the office. We have the facturas but haven't figured out how to do it yet.

Seems I'm right but wrong....just reading about the new regulations....still tring to understand what it means for repecos to change de "pequenos Contribuyentes al de Incorporación Fiscal". I'm having a hard time believing that small business owners need to give facturas to all customers. It has always been that a nota sufficed, but the sale or purchase was always written down, and you paid your small biz taxes based on that. Ms. thang, did you have to get new facturas or did you already have them?

IMO, there are too many restaurants in Ajijic anyways. A thinning of the herd will be good. The strong ones with consistently good food and service will survive.

I guess each person has their own vision of paradise........

Paradise is still the same.
It is just under new management   

mielicita wrote:

Ms.Thang wrote:What constitutes a small business ? Income or number of employees or what?
We have an accountant that we don't pay but trade services. I don't know much about the accounting end of things but I do know that we are in the 16% bracket and only my husband and myself (I am unpaid) work in the office. We have the facturas but haven't figured out how to do it yet.

Seems I'm right but wrong....just reading about the new regulations....still tring to understand what it means for repecos to change de "pequenos Contribuyentes al de Incorporación Fiscal".  I'm having a hard time believing that small business owners need to give facturas to all customers.  It has always been that a nota sufficed, but the sale or purchase was always written down, and you paid your small biz  taxes based on that.  Ms. thang, did you have to get new facturas or did you already have them?

Now it all has to be computerized. That doesnt mean you must have a computer, just access to one and the knowledge to use it, or the help of someone. About facturas, still learning the new regs. Ms. thang, did you have to get new facturas or did you already have them?

This is a good but simple article, in Spanish....it seems small businesses have up to fifteen months to implement changes....it also says that SAT will set up computers for people to use and provide advice.....hmmm, that might take a good while to set up. It also says that there may not be enough public accountants to help people as these changes take place.
http://diario.mx/Local/2014-01-03_d64e305b/truenan-nuevas-disposiciones-fiscales-a-tienditas-de-barrio-aqui

Re restaurants closing I wonder if he is just talking small Mexican owned restaurants or those owned by expats?

Our accountant brought the new facturas to the office and tried to set us up online but the system was saturated.
The old facturas we were using are not acceptable now. None of the vendors we buy from are using the new facturas yet.



Do I understand correctly from the link above that rent will not be taxed starting next year?

Ms.Thang wrote:Our accountant brought the new facturas  to the office and tried to set us up online but the system was saturated.
The old facturas we were using are not acceptable now. None of the vendors we buy from are using the new facturas yet.



Do I understand correctly from the link above that rent will not be taxed starting next year?

That would be nice, but the latest I've heard from a local rental agency is that unfurnished is being taxed at 25% and furnished at 35%, and continuing into the infinite reaches of time.  

Yikes!
I completely misunderstood " impuestos sobre la renta" . I really need to avoid these types of discussions.

But back to the thread title... I have great concern for the future of the Ribera of Chapala over the next five years or so. Three small businesses that I frequent have gone under in the last two months, and this is the high season. Farmacia Morelos that has been on the mains street in Chapala for well over a decade had to move into their garage at their home on Flavio Romero, they just couldn't afford the rent anymore. Almost everyone's earnings are way down , taxes are up, unemployment is high and foreign residents are coming here in fewer numbers. Joaquin Huerta was talking about this in a TV interview a couple of weeks ago. It's really quite worrisome.

Not true, first year you get a 100% tax credit, 2nd year 90% so there are NO taxes to pay, yes you must go to the SAT office to get an online password and best to get the electronic signature and then never have to go again.

new business opportunity, offering computer services for small business that cannot afford one.

gringal wrote:
That would be nice, but the latest I've heard from a local rental agency is that unfurnished is being taxed at 25% and furnished at 35%, and continuing into the infinite reaches of time.  

Say what huh? Holy carp. So if a landlord charges, say, MX$6000 per month for a furnished rental, he/she will have to pay a new tax of MX$2100 per month? That is just insane. That would mean skyrocketing rental costs.

When does this begin? Does it apply across the board, to all rentals?

I believe after deductable expenses.  Hardly any income anywhere escapes taxation....legally.

I have a friend in the rental business and she is pulling her hair out trying to meet the new law. Mom and Pop are going to suffer. Yes, it's the end of an era and it's sad.

Another business which has been effected is Lakeside Delivery. Jim told me that the SAT wanted to collect 16% IVA on the total purchase. Right now Costco collects it, he charges a service fee for delivery. He said that his accountant spent a whole day at SAT offices, and the workaround is that every customer must sign a letter, in Spanish, which he must keep on file for at least five years.

A thin wedge. Next people will be complaining about the proliferation of franchise convenience stores and fast food places. Things like rentals will move further underground or 'boom and bust' to avoid paying taxes (staying just long enough to make a pile of undocumented money, books showing a loss, and then shutting it down before the tax people find them).

I'm hoping to hear from either Spencer or someone in the rental business about the huge tax on rentals being talked about here. If this is true clearly the effects on the rental market would clearly be devastating.

Ms.Thang wrote:Yikes!
I completely misunderstood " impuestos sobre la renta" . I really need to avoid these types of discussions.

But back to the thread title... I have great concern for the future of the Ribera of Chapala over the next five years or so.  Three small businesses that I frequent have gone under in the last two months, and this is the high season. Farmacia Morelos that has been on the mains street in Chapala for well over a decade had to move into their garage at their home on Flavio Romero, they just couldn't afford the rent anymore. Almost everyone's earnings are way down , taxes are up, unemployment is high and foreign residents are coming here in fewer numbers. Joaquin Huerta was talking about this in a TV interview a couple of weeks ago. It's really quite worrisome.

Do you know the Farmacia Morelo's house number on Flavio Romero. I would like to keep using them and I don't want to drive the whole street looking for them.

CHILLIN wrote:Another business which has been effected is Lakeside Delivery. Jim told me that the SAT wanted to collect 16% IVA on the total purchase. Right now Costco collects it, he charges a service fee for delivery. He said that his accountant spent a whole day at SAT offices, and the workaround is that every customer must sign a letter, in Spanish, which he must keep on file for at least five years.

You are speaking about Lakeside Express, si?  
We use them regularly to avoid having the drive into Guadalajara to Costco .  The modest fees they charge to deliver goods to your door two days after you order them are well worth it.  Don't need Costco cards to use them, either.  They have a website, lakesideexpress.com
listing the Costco items available.  Unfortunately, they don't list the prices of the items, but we keep the receipts from previous orders to check that out.  I highly recommend their service.
 

The taxes on rentals in parts of Mexico that U.S. and Canadian people like to visit or live have always been pretty well underground. This is because they are so easy to sidestep - for example a Canadian company, renting to a Canadian, with the transaction taking place in Canada. Or a "Vacation Rentals" company whose sole asset is a house in Ajijic. Then it is problem for Canadian tax gatherers, but there so money cost deductions available that they are seldom worth pursuing (ie it would cost more in staff salaries and legal costs than they would ever hope to recover). Also putting a lien on a Mexican title from Canada would be difficult and expensive (I imagine).

Yes, sorry Lakeside Express. They have hired a local Mexican company to deliver now. I think I heard him right, that he is going to be in the office more to build up more business to deliver Tuesdays and Thursdays. He looked tired - but we all have days like that.

simpsca wrote:

Ms.Thang wrote:Yikes!
I completely misunderstood " impuestos sobre la renta" . I really need to avoid these types of discussions.

But back to the thread title... I have great concern for the future of the Ribera of Chapala over the next five years or so.  Three small businesses that I frequent have gone under in the last two months, and this is the high season. Farmacia Morelos that has been on the mains street in Chapala for well over a decade had to move into their garage at their home on Flavio Romero, they just couldn't afford the rent anymore. Almost everyone's earnings are way down , taxes are up, unemployment is high and foreign residents are coming here in fewer numbers. Joaquin Huerta was talking about this in a TV interview a couple of weeks ago. It's really quite worrisome.

Do you know the Farmacia Morelo's house number on Flavio Romero. I would like to keep using them and I don't want to drive the whole street looking for them.

Farmacia Morelos is on the corner of Flavio Romero and Zaragoza which is three blocks from the Main Street. The address is Flavio Romero 429 C . They have an awning and a sign out so it's pretty easy to spot and there is usually parking during the day time . Transitos don't work at night so you can park on the right if you need to. I'm so happy that you will continue to support this family business.

This country has always had a huge underground economy, this will just add to it.

Hacienda and other tax offices will become more automated, more efficient and it will be easier and cheaper for them to impose and collect taxes....down to the taco stand and rental house. We've seen this happen with Aduana and IMN vis a vis the car stickers and visas.