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Friday, August 1, 2008

Mexico to refund taxes to tourists

by John Flinn

Beginning in June, foreign visitors who arrive by air or sea will be able to get refunds on the 15-percent value added tax (VAT) they paid during their Mexican vacations.

“We know that Americans are facing a very severe recession and that some of them are choosing to only travel within the United States,” Benjamín Díaz, a Mexico Tourism Ministry official, told BusinessWeek. “It’s important for Mexico to offer those Americans who decide to travel abroad despite the recession an extra economic incentive: giving them back their tax.”

Mexico is setting up kiosks at five major international airports - Mexico City, Cancun, Guadalajara, Los Cabos and Puerto Vallarta - where visitors can reclaim the VAT they’ve paid on goods totaling at least 1,200 pesos ($115).

To qualify, purchases must be made at approved businesses with credit or debit cards issued outside Mexico. Visitors must present their passports at the time of purchase and get a receipt and official VAT refund form from the store.

Taxes paid on hotels and meals will not be refunded, and those who cross the border by land are not eligible.

For those who qualify, half of the VAT will be refunded immediately in pesos, up to a maximum of 10,000 pesos (about $955). The balance will be credited to the tourists’ credit cards or bank accounts within 40 days, according to the announcement.

Starting next year, the program will be expanded to other airports and cruise ports.
Tourism is Mexico’s third-largest source of revenue, bringing in $13 billion last year. Eighty percent of the 21 million foreign tourists visiting Mexico last year were from the United States, lured in part by the fact that Mexico is one of the few countries where the U.S. dollar has actually increased in value over the past year.

The VAT decision, Díaz told BusinessWeek, is aimed at keeping working- and middle-class Americans returning to Mexico’s beaches and Maya ruins.