One of the main limitations in using SAM to model power plants in another country is that we use a Value Added Tax scheme instead of a Sales Tax. This tax applies to the investment costs as well as to the revenues, while the sales tax only applies to the investment cost.
I have no problem applying the VAT to the Investments part, since I can input it as a sales tax. On the other hand, I'm having problems applying it to the Total Revenue part. I have already searched for a solution but found none which would solve the issue correctly. If there is already an available way to work around this issue I would thank you if you could let me know.
Having said this, my suggestion/request would be to implement a way to decide whether to use Sales Tax or Value Added Tax, since this would improve the model applicability in many other countries.
Here is a suggested workaround to model the 16% VAT in Mexico:
- Add a sales tax of 16% to match the 16% Value Added Tax. This inserts the VAT to the cash flow.
- Set the total depreciation basis to 86.2% to remove the VAT from the depreciation basis, since the VAT does not depreciate in the long term, as required by law. (Will probably differ from country to country)
- Add a IBI of 16%. Since the 16% VAT tax you paid is going to be in your favor when total taxes are calculated. (Will also probably differ from country to country)
- Add a State tax of 13.8%. Since the cash flows now have the VAT added to them, this will correspond to the VAT that will need to be paid.