Background on the Instituto Mexicano de Ejecutivos de Finanzas (IMEF)
The Instituto Mexicano de Ejecutivos de Finanzas (IMEF) is a prominent organization in Mexico, representing top financial executives. It plays a crucial role in shaping financial policies and providing insights into the Mexican economy. As such, its warnings should be taken seriously by both industry professionals and the general public.
The IVA Litigation and Its Impact
An ongoing dispute over the Value-Added Tax (IVA) between insurance companies and the Mexican government has recently been resolved. However, according to Gabriela Gutiérrez, president of IMEF, this resolution does not address the underlying issues. Consequently, insurance users will face higher costs and slower processes as insurers struggle to verify IVA on various lines of business in the future.
Financial Implications for Insurance Companies
Victor Manuel Herrera, the IMEF’s president of Economic Studies, explained that if the estimated amount – between 175,000 and 200,000 million pesos – is paid, it will significantly impact the financial situation of almost all insurance companies. This development is expected to lead to increased insurance premiums starting from 2026.
Profitability of the Insurance Sector in Mexico
Contrary to popular belief, the insurance business in Mexico is not highly profitable. During the pandemic, losses were observed in the “Gastos Médicos Mayores” sector, while post-pandemic saw an increase in auto insurance claims and associated monetary losses.
Details of the Government-Insurance Company Agreement
During the discussion of the Federal Income Law (LIF) 2026 in the Chamber of Deputies, Morena and its allies presented a reservation following an agreement between the government and insurance companies after years of IVA accreditation litigation.
The agreement aims to correct IVA-related irregularities and provide “facilities” for insurance companies to pay fiscal lawsuits against the authority, essentially “forgiving” the tax.
“Misinterpretation of the Law”
For years, insurance companies have been collecting IVA on premiums and later accrediting it to the tax authority as part of their fiscal obligations, even though it rightfully belongs to hospitals or mechanic workshops attending the accident. This “misinterpretation of the law” led to the fiscal authority identifying approximately 175,000 million pesos unpaid by insurance companies since 2024.
Changes to the LIF Article 25
As a result of these developments, Article 25 of the LIF was amended. It now states that IVA transferred in acquiring goods or receiving services, as well as the IVA paid during importation when such goods or services are intended for fulfilling insurance contracts and indemnification consists of damage compensation or restoration of the damaged asset, will not be accreditable.
Moreover, a fiscal incentive equivalent to the IVA accredited amount or, if applicable, the fiscal credit amount for that tax, including penalties, surcharges, and execution expenses, will be granted. This incentive equals 100% of the accrued penalties, provided that the taxpayers demonstrate they made the payment to rectify their fiscal situation by March 31, 2026.
Key Questions and Answers
- What is the agreement between the government and insurance companies about? The agreement aims to correct IVA-related irregularities and provide fiscal facilities for insurance companies to settle lawsuits.
- Why will insurance premiums likely increase? The agreement’s financial implications will substantially affect insurance companies’ short-term finances, leading to higher premium costs for customers.
- What sectors within the insurance industry have been impacted by the pandemic? The “Gastos Médicos Mayores” sector experienced losses during the pandemic, while post-pandemic saw increased auto insurance claims and associated monetary losses.
- What is the estimated financial impact of this agreement? The estimated amount ranges from 175,000 to 200,000 million pesos, which will significantly impact almost all insurance companies.
