Tourism ranks as Mexico’s third greatest source of revenue with $13 billion in 2007. It is also highly dependent on the US, which accounts for 80% of visitors. So to encourage Americans to continue to choose Mexico for their vacations, the government will offer value added tax (VAT) refunds to some foriegn travelers. Starting in June the tax incentive will be available to sea or air travelers who spend at least 1,200 pesos ($115) on Mexican goods, excluding hotels and food. The purchase must be at an approved business and payment must be made with a credit or debit card issued outside Mexico. You must also present your passport at the time of purchase to receive a refund form. The maximum refund is 10,000 pesos (about $955 US) with half refunded immediately in cash and the other half credited to your card within 40 days. This is a significant refund since the value added tax is 15% of the price of the good.

The tax incentive is a very smart move to encourage price-sensitive Americans to travel to Mexico. In addition to the tax free goods, the US dollar has actually increased in value over the past year as opposed to places like Europe where the dollar is weak. Fuel prices will also widen the price gap between flying across oceans versus a short flight to Mexico. All of these factors make Mexico the low-cost option for international travel and low cost providers usually do really well in recessionary economies.

Source Mexico to refund taxes to tourists