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expressly excluded in the Value Added Tax Law (Ley del Impuesto al Valor Agregado).Among the goods whose importation is exempt are those whose alienation in Mexicanterritory is exempt from payment of VAT, such as patent medicines, food products, fertilizers,gold, jewelry, books, newspapers, and works of art.As a general rule, the VAT imposed by the definitive import of merchandise into thecountry is calculated applying the rate of 15 percent of the value used for customs purposes.However, VAT can also be calculated applying the rate of 10 percent when itinvolves definitive imports into the area referred to as the border zone (franja fronteriza).The VAT paid for import can be a tax credited against the VAT that the importer transfersto and collects from a third party when the imported merchandise is alienated, providedthat the imported good is considered a deductible good for purposes of theIncome Tax Law (Ley del Impuesto Sobre la Renta).Although we are only discussing definitive importation in this section, it must be mentionedthat the import of merchandise under the temporary importation regime referredto in a previous section is exempt from VAT; therefore, one of the principal advantages tothe companies that operate a program under the Decree to Promote the Manufacturing,Maquiladora and Export Services Industry (Decreto para el Fomento y Operación de laIndustria Manufacturera, Maquiladora y de Servicios de Exportación) is the savings of theVAT paid on the definitive importation, even though it can later be credited or evenrefunded.5.2. Special Tax on Production and Services (Impuesto Especialsobre Producción y Servicios, IEPS)The definitive importation of goods can also result in the obligation to pay the IEPS,which applies only to those goods that are expressly indicated in the respective law.The IEPS must be paid at the time of the definitive importation, together with the generalimport tax that may be applicable. The applicable rate varies depending on the typeof good and oscillates between 25 and 160 percent. Among the goods whose importationinto the country is taxed with this tax are alcoholic beverages and beer, processedtobacco, cigarettes, cigars, gasoline, etc.The IEPS paid upon the importation of goods may also be credited against the IEPS thatis caused by the alienation of the same goods in Mexican territory. Therefore, it is anindirect tax that will affect or be paid by the final consumer.167Foreign Trade and Customs Regulations5.3. Tax on New Automobiles (Impuesto Sobre Automóviles Nuevos, ISAN)The ISAN is paid on the importation of automobiles into the country when it involvespersons other than the manufacturer, assembler, authorized distributor, or dealer in the