How Solutions Experts Use Value Added Tax & Mexico’s IVA Tax

Released June 27, 2022

Learn how Loup can help you navigate challenges in the supply chain process, and how VAT and IVA taxes affect transloading and international sales.

What is the VAT/IVA Tax?

The value added tax or “VAT” is a tax placed on goods and services implemented on January 1, 2022. El Impuesto al Valor Agregado or “IVA” is Mexico’s version of the VAT. The VAT is paid at the end of the supply chain process. Currently, IVA’s are charged at 16%. The United States does not have a VAT, but the VAT is an indirect tax that can be passed on from one party to another. Since Mexico has the IVA, consumers may see this tax arising when participating in international sales.

At What Point, Do I Experience the VAT?

The VAT is accessed on the Mexican portion for the rail move on freight originating in the United States. You will receive this when the vendor bills the service. The VAT is therefore implemented when goods pass through the border. In addition, when you get a quote from a vendor, they should inform you if the rate is with the VAT or without the VAT. The VAT charge tends to map out as follows: (line haul rate + fuel surcharge) x 16% = VAT.

How is Loup Assisting the Customer with the VAT?

Since Union Pacific is well connected in Mexico, Loup can provide routes and alternatives to drastically limit and mitigate IVA’s and VAT’s. With Loup you could potentially mitigate VAT’s impact on the transload and trucking portion of your business. For more information on how you can navigate through VAT/IVA through a Loup solution, Click Here!