The current Mexican tax system is similar in structure to that of industrialized countries. The 30% tax rate on corporate income is similar to Costa Rica's, El Salvador's, Nicaragua's, and Peru's, and lower than Brazil’s, Argentina's and Venezuela's. The 16% value added tax (IVA) rate is similar to Colombia's and lower than Argentina's, Brazil’s, Chile's, Peru's, and Uruguay's.
The maquiladora industry tax treatment, also known as IMMEX, is a sophisticated system that includes several tax incentives, not so prevalent in Mexico today. For example:
- Administrative support for the obligation of carrying out foreign related operations at market's value. In example, reporting a minimum tax utility of the highest of the following results: 6.9% of the value of assets utilized for the manufacture operation, or 6.5% above the costs of manufacture operation. This aid is known as safe harbor. Alternatively, an early termination of transfer costs can be requested, if the taxpayer considers that the safe harbor result does not correspond to his or her economical reality.
- Total deduction of specific personnel benefits whose deduction is limited to 43% or 47% of such benefits to the rest of the contributors according to the general rules.
- Starting 2015, 0% rate on the value added tax (IVA) on temporary machinery imports and equipment and inventories for certified companies regarding IVA or the possibility of granting a deposit in order to avoid IVA payment fulfilling foreign trade requirements established by the customs authority for the regulation of the mentioned goods.
- Protection for the headquarters in order to avoid the treatment of "permanent establishment" that would turn such headquarters to contributors in Mexico.
The Mexican tax laws are characterized by a special attention to formalities, form prevailing over substance for tax purposes, in most cases. In this regard, the above-mentioned benefits are subject to the compliance of formalities and other requirements.
Income Tax Law
Income Tax Law: Dividends.
Aside from the corporate 30% mentioned above, the utility distribution for a company's foreign shareholders is subject to a tax on 10% dividends. Nevertheless, the mentioned tax is reduced or eliminated according to dispositions of the various agreements in order to avoid the double imposition held by Mexico with more than 40 countries. Additionally, dividends on shares that have not been subject to corporate income tax are subject to an additional income tax and its impact can be mitigated or eliminated under certain conditions.
Income Tax: Wages.
This tax is imposed based on a chart with a maximum wage of 35%. The employers withhold it along with the contributions for the employees' social security. Additionally, the employers are obliged to pay fees to the Mexican Social Security Institute (IMSS), the National Housing Fund for Workers (INFONAVIT), and to make contributions to the workers retirement insurance (SAR). The Employers tax burden for these obligations is of approximately 30% above wages. For more information visit http://www.imss.gob.mx and www.infonavit.org.mx
Income Tax for non-residents working in Mexico
Foreign residents working in Mexico are obliged to pay taxes in Mexico if their stay is longer than 183 consecutive or non-consecutive days within a period of twelve months, in case a foreign resident company pays their wages. If a Mexican resident pays such wages, the tax applies from the employee's first working day in national territory.
Income Tax on payments to foreign residents
Payments made from a Mexican resident company to foreign residents are generally subject to income taxes. The payer must withhold and inform tax authorities. That is to say, deduct from the payments made to the foreign resident, the totality of the income tax.
The tax rates vary depending on the nature of the payments. Such rates can be significantly reduced or eliminated according to the agreements on double imposition held by Mexico.
Mexico does not currently require minimum or alternative taxes. The former asset tax and the single fee corporate tax have been abolished.
State Payroll Tax
The general rate is of 2%. The State of Baja California grants tax incentives that can reduce or eliminate such tax for up to a five-year period for new investors in the State or for expansion projects.
Other local taxes
Real estate owners are subject to a property tax relatively lower than federal and state taxes. Additionally, some state municipalities grant tax benefits on such tax.
Real estate acquirers are subject to a 2% tax on the acquisition of goods on the highest of the following values: transaction, cadastral, valuation.
From the second year of operation, employers are obliged to deliver their employees 10% of their fiscal profits for their participation in the companies' profits.
Audit Reports: Taxes and Social Security
Companies with a certain level of income, active or used within the current year, are granted the possibility of auditing their financial statements for tax purposes, and auditing social security and INFONAVIT (National Housing Fund for Workers) obligations. The mentioned audits must be issued by a certified public accountant.
Fiscal Calendar Closing Dates
Fiscal Year: January 1st to December 31st
|Income Tax, Legal Person|
|Annual return||March 31st|
|Interim payments||From the 17th – 19th of each month|
|Safe harbor notification||March 31st|
|Income tax withheld on wages, and other withholdings|
|Monthly interim payments||From the 17th – 19th of each month|
|Payment of annual differences of withholdings on wages||February 28th|
|Annual record of compensations and taxes withheld||January 31st|
|Annual return on payroll, wages, wage credit and similar items||February 15th|
|Withheld income tax on professional services and leasing to natural persons|
|Annual return||February 15th|
|Monthly interim payments||From the 17th – 19th of each month|
|Income tax on subordinated services in Mexico from people residing abroad|
|Monthly payments||From the 17th – 19th of each month|
|Monthly record||February 15th|
|Annual return of operations with parties residing abroad||31 de marzo|
|Value Added Tax|
|Monthly final payments||From the 17th – 19th of each month|
|Withheld value added tax on payments of wages, leasing, freights and other monthly payments||From the 17th – 19th of each month|
|Informative statement on loans and financing granted from abroad||February 15th|
|Informative statement on payments to persons residing abroad||February 15th|
|Informative statement of operations with clients and suppliers||February 15th|
|Annual return on granted donations||February 15th|
|State license renewal||February 28th|
|Tax on personnel expenses||From the 25th and 27th of each month|
Other Payments and Federal Obligations
|Contributions to SAR||From the 17th – 19th of each month, except on December|
|Contributions to Infonavit (SUA)||From the 17th – 19th of each month, except on December|
|Credit withholdings and contribution to credits (SUA)||From the 17th – 19th of each month, except on December|
|Mexican Social Security Institute Fees (IMSS)||From the 17th – 19th of each month|
|Determining of the degree of risk involved in labor for Mexican Social Security Institute Fees (IMSS)||February 28th|
|Workers participation on profits||May 30th|
|Statistic report for the Secretariat of Economy||From the 17th – 19th of each month|
|Annual economic statement for the renewal of subscription in the Directorate General of Foreign Investment||April 31st|
|Statement on income and expenditure not affecting social capital for the Directorate General of Foreign Investment||April 15th|
Chamber of Manufacturing Industry – optional
|Annual record||January 31st|
Mexican Business Information System (SIEM) –optional
|Data maintenance||January 31st|