Nuevo Leon Slashes Payroll Tax to Lure EV Investment & Boost Economy

The government of Nuevo León, Mexico's industrial powerhouse, has launched an aggressive fiscal stimulus package heavily focused on its payroll tax, aiming to cement its position as a primary destination for nearshoring investment, particularly within the rapidly expanding electromobility sector.

The package, announced ahead of a November 30th deadline for companies to adhere, features substantial discounts and subsidies on the state's Impuesto Sobre Nómina (ISN), or Payroll Tax. Officials are betting these incentives will provide a critical edge in attracting new manufacturing operations and supporting existing businesses navigating global economic shifts.

Governor Samuel García highlighted the strategic importance of the measures, stating, "The economic package includes the elimination and reduction of taxes, the subsidy and forgiveness of fiscal debts, and fiscal incentives so that the economy continues to be the engine of Nuevo León and Mexico."

The most significant incentives are explicitly targeted at the electromobility supply chain. Under the plan, vehicle assembly companies (OEMs) establishing or expanding in the state could benefit from a striking 95% reduction in their ISN liability. Tier 1 suppliers providing crucial software, hardware, infrastructure, and technological services are eligible for a 70% discount, while Tier 1 suppliers focused on traditional auto parts and non-technological services can receive a 50% reduction. Even indirect Tier 2 and Tier 3 suppliers are included, qualifying for a 30% discount.

Emmanuel Loo, Undersecretary of Investment at the Secretariat of Economy, emphasised that these targeted supports aim to "fortify the 'Hecho en Nuevo León' (Made in Nuevo León) seal," reinforcing the state's brand as a high-value manufacturing centre.

Beyond the specific electromobility tiers, the state is also incentivising local sourcing more broadly. Carlos Contreras, Undersecretary of Tax Administration, explained that companies demonstrating higher levels of local content in their supply chains can achieve progressively larger ISN benefits. Firms with over 51% local sourcing receive a 10% benefit, rising to 20% for those exceeding 75%, and reaching a potential 33% reduction for those sourcing more than 85% locally. [Note: The source material presents these local content figures slightly separately from the main electromobility table; the precise interaction requires clarification but signifies a clear push for deeper regional supply chains].

Contreras also pointed to specific relief aimed at alleviating potential cash flow pressures and encouraging decentralisation. Exporting companies establishing operations outside the increasingly congested Monterrey metropolitan area, particularly those utilising the Puente Colombia border crossing, are eligible for a 100% ISN reduction. "Given the different scenarios of uncertainty presented, for example regarding tariffs, many taxpayers with export activities or who are suppliers to others, could be affected," Contreras noted. "Therefore, to avoid impacting their liquidity, this will be very attractive, allowing them to continue operating and generating employment."

The initiative extends beyond attracting new ventures, offering substantial relief for companies with existing ISN debts accrued before January 1, 2024. The state is offering:

• A 50% subsidy on the updated principal ISN amount owed.
• A 100% waiver on surcharges, late payment penalties, and associated execution costs.
• A 50% reduction on fines related to other outstanding state fiscal obligations.

Furthermore, an additional 5% subsidy on the total outstanding tax liability is available for businesses that settle their dues within the first 30 days following notification, providing a strong incentive for prompt payment.

This multi-pronged fiscal strategy underscores Nuevo León's ambition to leverage the global supply chain realignment and the automotive industry's shift towards electrification. By significantly reducing a key operational cost – payroll taxes – the state aims to make a compelling financial case for investment compared to other jurisdictions in Mexico and North America. The deadline of November 30th adds urgency for companies currently evaluating location decisions.

With its proximity to the US market, established industrial base, and now, a significantly enhanced fiscal incentive framework, Nuevo León is sending a clear message that it intends to aggressively compete for the next wave of advanced manufacturing investment, particularly in the critical electric vehicle ecosystem.