In this page: Corporate Taxes | Accounting Rules | Consumption Taxes | Individual Taxes | Double Taxation Treaties | Sources of Fiscal Information
Corporate tax | 30% |
Agriculture, livestock, fishing, and forestry activities | 30% reduction of their tax liability |
A 10% WHT on profit distributions applies on branches, which can be reduced or eliminated based on any applicable tax treaty provision.
Mexican entities are not subject to special tax treatment on capital gains; however, the use of capital losses is restricted in certain cases.
Gains on securities are included in regular taxable income.
When stocks issued by Mexican companies, securities that exclusively represent these shares, stocks issued by foreign companies listed on the Mexican stock market, and derivative financial operations based on stock indexes or the aforementioned shares are sold in recognized stock or derivative markets according to the Securities Market Law, the resulting capital gains will be subject to a 10% income tax rate.
When determining the taxable gain on real estate, the cost basis of land and buildings can be adjusted for tax purposes based on how long the assets have been held. This adjustment uses inflation factors applied to the net undepreciated balance. Non-residents who choose to pay tax on net income by appointing a legal representative in Mexico follow similar rules. The tax rate on the net gain is 35% or a lower treaty rate if applicable. Otherwise, a 25% final withholding tax on gross income applies to non-residents.
Start-up expenditure incurred prior to the commencement of business may be amortised at the yearly rate of 10%, after applying the adjustment factors. The deduction of charitable contributions is limited to 7% of the taxable income of the previous year.
Typically, interest expenses are eligible for deduction under certain conditions. These conditions encompass investing the principal in the primary activity of the Mexican taxpayer, fulfilling withholding obligations, submitting informative returns detailing the loan and transactions with related parties, adhering to thin capitalization rules (requiring a 3:1 debt-to-equity ratio), ensuring the transaction's arm's length nature, and confirming the interest payment does not resemble a deemed dividend. Additionally, there's a constraint on net interest (taxable accrued interest minus deductible interest) surpassing 30% of an adjusted taxable profit. Notably, this restriction applies solely to taxpayers whose deductible accrued interest exceeds MXN 20 million, determined on either a Mexican group or related party basis.
R&D expenditure (including investment in R&D) gives rise to a 30% tax credit. The tax credit is equal to current-year R&D expenses in excess of the average R&D expenses incurred in the previous three years.
For payments related to technical assistance, the transfer of technology, or royalties to be considered deductible, they must be made directly to companies that possess the necessary technical expertise to provide the relevant service. If payments are made to foreign affiliates, they will only be considered deductible if they adhere to the arm's-length principle.
Typically, losses can be carried forward for up to 10 years, except for deep-water operations linked to oil extraction activities, where the period extends to 15 years, all subject to relevant inflation adjustments. However, carrying losses back is not allowed.
Non-deductible items include penalties, unauthorised donations, contingencies, indemnities, goodwill, exempt salaries, etc.
Companies engaged in oil exploration and production are subject to a special tax regime as set out in the Hydrocarbons Revenue Law.
Social security contributions are based on the daily salary plus any other compensation paid to the employee, with rates varying according to the base salary of their Mexican employees and the type of concepts for which the compensation is given to the employee (ranging from 15% to 25%). For a low-risk company, the employer's maximum annual contribution is MXN 188,657. However, this limit may be higher depending on the employer's occupational risk premium, which is determined by the employer's activity. These maximum contributions apply only to employees who earn more than MXN 989,672 per year (or MXN 78,400 per month).
The acquisition of new vehicles is subject to taxation, while the different states may impose a tax on the ownership of vehicles. Mexico does not levy stamp duties.
Mexico | Latin America & Caribbean | United States | Germany | |
---|---|---|---|---|
Number of Payments of Taxes per Year | 6.0 | 28.2 | 10.6 | 9.0 |
Time Taken For Administrative Formalities (Hours) | 240.5 | 327.5 | 175.0 | 218.0 |
Total Share of Taxes (% of Profit) | 55.1 | 46.8 | 36.6 | 48.8 |
Source: The World Bank - Doing Business, Latest data available.
- The balance sheet, which reflects the financial situation of the enterprise and provides information about the assets, liabilities and capital on a particular date (the last day of the fiscal year).
- The profit and losses report, reflects the income, expenses, loss and profit obtained during that particular period (typically each trimester or fiscal year).
Annual Tax Rates for Resident Individuals | Vary from 1.92% to 35% (2024) |
from MXN 1 to 8,952.49 | 1.92% |
from MXN 8,952.50 to 75,984.55 | 6.4% |
from MXN 75,984.56 to 133,536.07 | 10.88% |
from MXN 133,536.08 to 155,229.80 | 16% |
from MXN 155,229.81 to 185,852.57 | 17.92% |
from MXN 185,852.58 to 374,837.88 | 21.36% |
from MXN 374,837.89 to 590,795.99 | 23.52% |
from MXN 590,796.00 to 1,127,926.84 | 30% |
from MXN 1,127,926.85 to 1,503,902.46 | 32% |
from MXN 1,503,902.47 to 4,511,707.37 | 34% |
over MXN 4,511,707.38 | 35% |
Income earned by non-residents | |
from MXN 1 to 125,900 | exempt |
from MXN 125,900 to 1,000,000 | 15% |
over MXN 1,000,000 | 30% |
Business owners and independent professionals can generally enjoy the same deductions as corporations. Currently, a net loss stemming from professional and business activities cannot be deducted against other income; however, the tax loss can be carried forward for ten years, solely against professional and business income. Capital losses are eligible to offset capital gains and, in certain scenarios, other investment income, but they cannot be used against compensation, business, or professional income. Rental losses are deductible against other investment income within the same tax year; nevertheless, any surplus loss cannot be carried forward.
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: November 2024