Under a shelter, your foreign company is not treated as having a permanent establishment in Mexico, as long as five conditions hold: you are not a related party of the shelter, you register with the tax authority, you file the informative return by June, you notify SAT when you stop, and you never sell Mexican-made goods without an export pedimento. The old four-year limit was repealed in 2019. The protection is now permanent and conditional, which is a very different thing from automatic.
We run a shelter, so we file half of this for our clients and watch the other half sit on their side of the line. This article is about that line. If you are still choosing a structure, the four options are compared in our guide to market entry legal strategy in Mexico.
(Permanent establishment is the tax world’s version of accidentally moving in. Nobody signs anything. One day the authorities simply decide you live there.)
What Protects You, and What Breaks It
The shield lives in Article 183 of the Income Tax Law. It is a list of conditions, not a status you acquire once, and most of the ways it fails are ordinary business decisions made without a tax review.
| Condition | What it requires | Who controls it |
|---|---|---|
| Unrelated parties | You cannot be a related party of the shelter or its related parties | You, at selection |
| Tax registration | Register with the RFC, without tax obligations of your own | Shared |
| June filing | The informative return of maquila operations, by June of the following year | Mostly the shelter |
| Exit notice | Notify SAT within the month after you stop the activity | You |
| Information exchange | Your country needs a broad information-exchange agreement with Mexico | Fixed by geography |
| No domestic sales | No selling Mexican-made goods without an export pedimento | You, every quarter |
| No asset sales to the shelter | Machinery, tooling, molds and inventory stay yours | You |
| The shelter’s own compliance | It computes and pays the tax, and cures any breach within 30 calendar days | The shelter |
Every row comes from the current text of Articles 183 and 183-Bis of the Income Tax Law. Note how many of them are yours. The shelter files the returns; you supply most of the ways to lose the protection.
What Creates a Permanent Establishment in the First Place
A permanent establishment is a fixed place of business through which a foreign company carries on business in Mexico: a branch, an office, a factory, a workshop. It also arises through people. Since the 2020 reform, someone who habitually concludes contracts in Mexico for your company, or who plays the principal role leading to those contracts, can create one even without formal signing authority.
Storage, display and purchasing are excluded when they are genuinely auxiliary, and so is keeping a stock of goods purely so another company processes them, which is the exclusion the whole maquila model leans on. There is an anti-fragmentation rule attached: splitting one cohesive business into small auxiliary pieces does not buy you the exclusion back.
The US treaty goes further in one specific way worth knowing. Under the US-Mexico income tax convention, an enterprise has a permanent establishment where someone habitually processes goods on its behalf using assets it supplied. In other words, the treaty points straight at a maquila arrangement. Article 183 is what keeps that pointer from landing.
The Four-Year Rule Is Gone, and Pages Still Repeat It
You will read that shelter protection expires after four years. It used to. The reform published in December 2019 removed it: as EY put it at the time, “The tax reform repeals the four-year period for nonresident entities to operate in Mexico without paying income tax.”
We searched the current text of Articles 183 and 183-Bis for any time limit and there is none. What replaced the clock is a permanent set of conditions plus a tax bill, which for most companies is the better trade and for none of them is a holiday.
Treat any page that still sells a four-year exemption as evidence about the page rather than about the law. Several shelter providers’ own sites were still saying it this year.
You Are Not Tax-Free, You Are Tax-Represented
This is the part that surprises first-time shelter clients. Article 183-Bis requires the shelter to calculate taxable profit for each of its clients separately, at the greater of 6.9% of the assets used in the operation or 6.5% of total operating costs, and to pay tax on it at the 30% corporate rate.
So Mexican income tax is being paid on your operation. The shelter is jointly liable for calculating and paying it, and the cost reaches you through the fee. Any pitch that frames a shelter as paying no Mexican tax is describing a structure that does not exist.
The asset test is the one that bites asset-heavy plants, because 6.9% of a large equipment base can exceed 6.5% of a lean cost base by a wide margin. Model both legs before you ship machinery, not after.
Safe Harbor Is Now the Only Road
For maquiladoras generally, the alternative routes have closed. Holland & Knight records that “the safe harbor methodology became the only available mechanism to determine taxable profits for maquiladora operations”, and Garrigues notes the last advance pricing agreements expired at the end of 2024.
One door remains open for asset-intensive operations. KPMG reports that SAT and the IRS agreed to allow bilateral advance pricing agreements, which can cover fiscal years up to 2029. That is a project with lawyers attached, not a checkbox, and it is worth pricing only if the asset leg is punishing you.
The Day the Protection Fails
Article 183-Bis sets out the sequence plainly. If the shelter does not meet its obligations, SAT requires it to explain, and it has no more than 30 calendar days to fix the problem. If it does not, two things happen: the shelter is suspended from the importer registry, and the foreign resident is deemed to have a permanent establishment in Mexico.
Read that again from your own side of the table. A filing your shelter missed, cured or not within a month, decides whether your parent company has a taxable presence in Mexico. That is the real reason to audit a provider’s compliance record rather than its brochure, and the eight checks are in our shelter company scorecard.
Once a permanent establishment is deemed, your company carries the full obligations of a Mexican taxpayer on the attributable profit at 30%, and the US treaty relieves double taxation through a foreign tax credit rather than by making the Mexican tax disappear. The cleanup is an accounting year, not an afternoon.
The Risks Only You Can Create
Your shelter files returns. It cannot control how your own people behave in Mexico, and that is where a dependent-agent permanent establishment comes from. Four habits are worth a policy rather than a hope.
- Closing deals on site. If your staff habitually negotiate or effectively close customer contracts from Mexico, the agent rule is in play regardless of where the paper is signed.
- Selling into Mexico. Any sale of Mexican-made product without an export pedimento breaks Article 183 directly. There is no small version of this.
- Selling assets to the shelter. Machinery, tooling, molds and inventory cannot be sold to the provider, before or during the arrangement.
- Quietly becoming related parties. Equity, control or a web of common ownership between you and the provider removes the protection entirely.
Visiting engineers, auditors and plant managers are a normal part of a shelter operation and are not the problem. People closing business are. The distinction is about function, not job title, and your travel policy is the cheapest control you own.
What a Tax Director Should Keep on File
If SAT ever asks why your company has no permanent establishment in Mexico, the answer should be a folder rather than a phone call. We ask clients to hold six things, refreshed annually.
- Proof you are unrelated to the shelter. An ownership chart beats a statement of belief.
- Your RFC registration, showing registration without tax obligations.
- The June informative return acknowledgment, obtained from the shelter each year rather than assumed.
- The safe harbor workpapers behind the 6.9% and 6.5% calculation for your operation.
- Export documentation covering every unit of output, including virtual exports to other IMMEX plants.
- An asset register proving machinery and inventory remain yours.
Ask your provider for items three and four in writing every year. The ongoing obligations that sit behind them are in staying compliant after IMMEX approval, and if the answers keep arriving late, our guide to moving to your own entity exists for a reason.
Frequently Asked Questions
Does a shelter protect my company from permanent establishment in Mexico?
Yes, under Article 183 of the Income Tax Law, provided you are not a related party of the shelter, you register with the RFC, the June informative return is filed, you notify SAT when activities end, your country has an information-exchange agreement with Mexico, and you do not sell Mexican-made goods without an export pedimento.
Is there still a four-year limit on shelter operations?
No. The December 2019 reform repealed it, effective 2020. The current text of Articles 183 and 183-Bis contains no time limit, only continuing conditions.
Does a shelter client pay income tax in Mexico?
Yes. Article 183-Bis requires the shelter to compute taxable profit per client at the greater of 6.9% of assets or 6.5% of operating costs and pay 30% tax on it. The shelter is jointly liable for that payment.
What happens if the shelter fails to comply?
SAT requires it to explain and gives it up to 30 calendar days to cure. If it does not, the shelter is suspended from the importer registry and the foreign resident is deemed to have a permanent establishment in Mexico.
Can my employees visit the plant in Mexico without creating a permanent establishment?
Technical visits, audits and management oversight are normal. The risk comes from people who habitually conclude contracts, or play the principal role in closing them, from inside Mexico.
Does the US-Mexico tax treaty prevent a permanent establishment?
Not by itself. The treaty actually deems a permanent establishment where goods are habitually processed on your behalf using assets you supplied, which is why the Article 181 and 183 regimes matter. The treaty’s role is to relieve double taxation if a permanent establishment does arise.
This article is general information and not tax advice, and your structure deserves a named adviser who has read your contracts. Send us your setup and we will walk the Article 183 conditions against it line by line, free of charge, including the lines our own shelter program is responsible for.
