Mexico
Financial Year – 1 January – 31 December
Currency – Mexican peso (MXN)
Corporate Tax Summary
Residence – A company is resident in Mexico if it has its main business administration or place of effective management in Mexico, regardless of its nationality. A company is regarded as having its place of effective management in Mexico when the person(s) making or executing decisions concerning the company’s control, direction, operation or administration and activities are based within the territory of Mexico. Mexican tax law does not contain a definition of the concept of source of wealth; nevertheless, it includes specific types of withholding tax in respect of income earned in Mexico.
Basis of Taxation – Entities resident in Mexico are subject to income tax on their worldwide income. At the same time, they have the benefit of crediting any income tax paid abroad which fulfils specific requirements.
| Reference | ||
| Corporate Income Tax Rate (%) | 30% | Article 9 of the Income Tax Law (LISR). |
| Branch Tax Rate (%) | 30% | Articles 2 and 9 of the Income Tax Law (LISR). |
| Withholding Tax Rate: | ||
| Dividends – Franked | 30% | According to Mexican law, dividends paid between resident companies from corporate profits, which have been subject to corporate income tax, are not subject to additional tax. Moreover, if corporate profits are not subject to corporate income tax, an “equalisation tax” will apply to distributed dividends (applicable to the company paying the dividends). Resident companies must keep CUFIN account records concerning their net, undistributed after-tax profits to determinate if dividends were subject to tax prior to their distribution. In addition, dividends distributed by resident companies to resident individuals and non-residents in general, are subject to an additional 10% withholding tax. |
| Dividends – Unfranked | 10% | |
| Dividends – Conduit Foreign Income | 10% | |
| Interest | 10%, 4.9%, 15%, 21% | Interest paid to non-residents is subject to a final withholding tax. The rate differs depending on the type of recipient (article 166 of the Income Tax Law). |
| Royalties from Intellectual Property | 5%, 35%, 25% | Royalties paid to non-residents are subject to a final withholding tax on the gross payment at various rates (article 167 of the Income Tax Law). |
| Fund Payments from Managed Investment Trusts | 25% | |
| Branch Remittance Tax | 10% | Article 164 of the LISR (Income Tax Law). |
| Net Operating Losses (Years) | ||
| Carry Back | ||
| Carry Forward | 10 years |
Individual Tax Summary
Residence
Individuals are resident in Mexico if they have a dwelling in Mexico. If an individual also has a dwelling in another country, she/he is considered a Mexican resident if her/his centre of vital interests is located in Mexico. For these purposes, the centre of vital interests is considered to be in Mexico if:
- more than 50% of her/his total income in a calendar year is Mexican-sourced income or
- her/his main centre of professional activities is in Mexico.
Likewise, Mexican nationals are considered to be Mexican tax residents, unless evidence to the contrary can be provided.
Basis of Taxation – Individuals resident in Mexico are subject to income tax on their worldwide income. Tax is imposed on an annual basis at progressive tax rates and ranges from 1.92% to a maximum rate of 35%. Although monthly advance payments are required in most cases, withholding taxes may apply in some cases. Depending on the type of income, the tax withheld at source may be considered a final payment or treated as an advance payment of the income tax due.
Filing Status – Mexico uses a self-assessment system. Individuals are required to file a tax return and compute their own tax liability. Individual annual tax returns are due by 30 April following the close of the relevant tax year
Personal Income Tax Rates
| Taxable Income | Tax Payable – Residents |
| Up to MXN 6,942 | 1.92% |
| MXN 6,943 – 103,550 | 10.88% |
| MXN 103,551 – 144,199 | 17.92% |
| MXN 144,120 – 458,132 | 23.52% |
| MXN 458,133 – 3,498,600 | 34% |
| Above MXN 3,498,601 | 35% |
For non-residents the tax rate depends on the type of activity.
| Taxable Income | Tax Payable – Non Residents |
| Salaries | Up to MXN 125,900 = Nil MXN 125,901 – 1,000,000 = 15% Above MXN 1,000,000 = 30% |
| Fees | Any income = 25% |
| Property leasing | Any income = 25% |
| Real estate sales | Any income = 25% |
| Sales of shares | Any income = 25% |
| Dividends | Any income = 10% |
| Interests | Any income = 10% – 21% |
| Royalties and technical assistance | Any income = 1% – 25% |
| Building and maintenance | Any income = 25% |
| Prizes | Any income = 1%, 6%, 21% |
| Artists, athletes, shows | Any income = 25% |
| Other income | Any income = 35% |
Goods and Services Tax (GST)
| Rate | 16% |
| Taxable Transactions | In Mexico VAT is imposed on specific acts or activities carried out by individuals or companies, such as the taxable supplies of goods and services as well as on imports of taxable goods and services into Mexico, irrespective of their tax residence. Exports and a few other supplies are subject to a 0% rate. Some specified transactions are exempt, either with or without a reduced credit for VAT previously paid. VAT is also levied when the temporary use of a good is granted. In computing the VAT liability, input VAT may be credited against output VAT, so that in practice only the VAT on the taxpayer’s supplies is charged. VAT applies to all stages of production and distribution. From 2017, the VAT reported on investments made and expenses incurred in preoperational periods on or after 1 January 2017 will be credited on the tax return of the first month in which taxable activities are carried out. At the request of the taxpayer, the VAT refund may also be credited in the month after the expenses and investments are made, subject to certain requirements. VAT paid for sub-contracted labour is creditable to the extent that the contractor complied with the obligation to withhold 6% of the value of the consideration effectively paid. From 1 June 2020, digital services provided by non-residents to recipients located in Mexico are subject to VAT. |
| Registration | Individuals and entities who provide goods and services to the Mexican market must be enrolled in the Mexican tax registration and charge/pay VAT. |
| Filing and Payment | VAT returns must be submitted on a monthly basis. Returns should be filed and any tax due paid by the 17th of the month following the end of the period. Tax returns may only be filed electronically. VAT credits may be carried forward into future months, but may also be credited back. Annual tax returns are also due. In addition, monthly purchase listings must be submitted (Declaración Informativa de Operaciones con terceros). |
Other Taxes Payable
| Tax | Reference |
| Payroll Tax | Payroll tax is levied in the states and Mexico City on wages paid for dependent personal services. The tax is generally imposed at a flat rate of 3%, applied to the gross salaries paid by employers. Certain states may apply rates between 1% and 3%, and may grant exemptions to promote employment in underdeveloped regions. Payroll tax is deductible as an ordinary expense for income tax purposes. |
| Stamp Duty | There are no stamp taxes in Mexico, but there is a title transfer tax. The transfer of real estate is subject to a variable transfer tax at rates averaging 2% to 5% on the highest of the value of the transaction, fair market value, or registered municipality value. Transfer tax is levied by most states and Mexico City. |
| Land Tax | In Mexico, property tax is known as “predial”, which is paid by anyone who owns a property, regardless of the use made of it, whether residential, commercial or industrial. It is payable yearly. Predial on average constitutes 0.1% of the assessed value of the particular property at the time of sale and is unchanged throughout the period of ownership. |
Excise tax
The Special Tax on Production and Services (IEPS) is an excise tax which is levied on sales and imports such as the following:
- Gasoline – variable percentage
- Alcoholic beverages tax and services related to them – 26.5 %, 30% and 53% (The rate depends on the percentage of alcohol and the type of beverage)
- Tobacco/cigarettes and related services tax – 26.5 %, 30% and 53% (The rate depends on the tobacco product. A rate of 30.4% applies to handmade products only.)
- Pesticides – 6%, 7% and 9%
- Food with a calorie density of 275 kilocalories (Kcal) or more per 100 grams – 8%
- Gambling and lotteries – 30%
- Rendering of telecommunications services through public networks, except for public and rural telephony and connection services between public networks and the internet – 3%
The rates given above are subject to increase and are updated annually according to inflation.
Certification is also available for IEPS and VAT for companies in good legal standing with their tax and customs obligations. Certification is a benefit for the Maquila sector and aims to provide a 100% tax credit for VAT and IEPS on temporary imports.
Vehicle taxes
There is no federal tax on the ownership of vehicles, however, the state may levy a similar tax on the acquisition of new vehicles. This tax is payable, in addition to VAT, when the vehicle is purchased. The only vehicles excluded are those considered as ‘hybrid’ (e.g. powered by battery) which are not subject to the “new vehicle acquisition tax”.
Water supply duties
A water supply duty is imposed in Mexico City and by the municipalities of other selected states. The duties are determined based on the volume of water consumed and the type of tap and consumption (i.e. residential, commercial, industrial).
Customs duties/import tariffs
General import duty rates range from 0% to 35%. However, most imports fall within the range of 3% to 20%. Other rates and higher duties apply to certain food products, shoes, and textiles. In general, temporary imports are exempt from customs duties.
According to most of Mexico’s free trade agreements, a 0% duty rate is provided for approximately 90% of goods imported into the country.
Last updated: 02.09.2020