Mexico city - Tax filing services
All individuals with resident status receiving income during the calendar
year are required to file an annual tax return no later than April 30 of the
In the case of salaried employees, the employer is required to compute the annual tax on behalf of the employee, unless the employee notifies the employer he will file an annual return himself.
Paguro recommends that you file your taxes through a reputable certified public accountant firm (Contador Publico).
The main taxes payable by individuals and by corporations operating in Mexico and, in certain cases, by foreign companies, are those levied by the federal government.
1. Taxes on income, including a minimum tax based on assets held;
2. Value-added tax;
3. Import and export taxes;
4. Payroll taxes, social security premiums, mandatory retirement savings system, and contributions to the National Workers' Housing Fund.
There are some special federal taxes on a few specific products and services, such as alcoholic beverages, cigarettes, gasoline, telephone service, automobiles, etc.
1. On real estate property;
2. On salaries; and
3. On acquisitions of real estate property.
Resident individuals are subject to Mexican income tax on their worldwide income, regardless of their nationality. Non-residents, including Mexican citizens who can prove residence for tax purposes in a foreign country, are taxed only on their Mexican source income.
The Federal Tax Code provides that a foreign individual will be considered a resident of Mexico for tax purposes when he has established his home in Mexico, unless he has been physically present in a foreign country for more than 183 days, consecutive or not, in one calendar year, and is able to prove residence for tax purposes in that other country.
Individuals with temporary or permanent immigrant status are usually considered residents, unless the foreigner enters Mexico during the last half of the calendar year, in which case he would have been outside the country for more than 183 days and should probably be taxed only on this Mexican source income during that first calendar year.
Foreigners working in Mexico under a visitor's permit are usually not considered as residents until they have established some type of physical home in Mexico and have remained in the country for at least 183 days in a calendar year.
Income from personal services (earned income) includes salaries, commissions and allowances of all types, including those for housing, living expenses, education, foreign-service, tax reimbursements, and amounts received as employee profit sharing.
Certain benefits may be considered as taxable income of the individual
even if they are not a deductible expense for the employer.
Living expenses can be absorbed free of tax to the employee only in the case of short-term visits and if supported by receipts from third parties. A per diem rate is treated as a taxable allowance. Reimbursements of expenses of a spouse or dependants usually represent taxable income to the employee.
Business travel expenses, other than those supported by receipts from third parties and limited to maximum deductible amounts must, in general, be added to salaries for income tax purposes.
Residents are required to include investment income in their annual returns, except for: interest from the Mexican banking system and government obligations, which is either subject to a final withholding tax of 20% on gross interest (or a portion thereof) or is exempt; dividend income from Mexican corporations or investment funds; and capital gains on transactions carried out through the Mexican stock exchange, which are exempt.
Gains on the sale of real estate or shares of capital stock receive favorable income tax treatment.
Gains from the sale of the taxpayer's principal residence are exempt, provided the taxpayer occupied it as such during the two years before the sale.
Individuals with resident status are taxed on their worldwide capital gains. Non-residents are only subject to Mexican tax on gains arising from sales of real property located in Mexico or non-exempt sales of shares of Mexican companies.
Employees are not allowed business-related deductions, although reimbursements of properly supported moving and travel expenses that are deductible to an employer do not represent taxable income to the employee.
A resident is allowed to deduct un-reimbursed medical, dental or funeral
expenses for himself and dependants, as well as certain charitable
There are no standard deductions, except that an individual may deduct 50% of residential rental income instead of actual expenses and depreciation of the property.
Residents are allowed to deduct an amount equal to 30 days minimum wage if they receive an annual bonus from their employer.
Taxable income is taxed in accordance with a progressive table of rates from 3% to a maximum marginal rate of 35%. The top marginal rate is usually reached very rapidly.
A resident may obtain a credit to reduce his Mexican tax, payable for any foreign income tax paid on foreign source taxable income, and subject to certain limitations.
A non-refundable low-income credit (subsidy) designed to reduce the tax burden of taxpayers with lower income is granted. This credit is phased out if the taxpayer receives tax-exempt benefits from the employer. For lower levels of income, it may reduce the taxpayer's burden by up to 50% of the tax.
Contributions to the Mexican Social Security Institute are withheld from employees at the rate of 5.15% of covered salaries up to a maximum of 25 times the minimum wage in the Federal District (10 in the case of old age, death and disability insurance), resulting in a maximum employee contribution of around $1,600 dollars per year.
The Mexico City government levies a 2% payroll tax, payable by the employer.
Any unpaid balance of tax is payable upon filling the return. The full
tax on salary income and certain interest income is withheld at
However, in the case of salaries received by resident individuals from non-resident employers, the law requires such individuals to file monthly advance tax returns to pay an amount equal to the tax withholdings applicable to these wages. The monthly returns are due by the 17th day of the following month.Employee Profit Sharing
All businesses/companies with employees (proprietorships, partnerships or corporations) are required to distribute a portion of annual profits among all employees, except directors and the general manager. The employee's right to share in the profits of a company/business does not grant them any right to intervene in its management.
Employees are entitled to receive as their share of their employer's annual profits an amount equal to 10% of taxable income, with certain modifications to eliminate the income tax adjustments related to below, in which the labor law establishes a limitation equal to one month's salary.
In the case of entities whose income is derived exclusively from personal services, the amount of profit sharing payments made to each employee need not exceed one month's salary. The same limitation applies in the case of employees whose duties relate to collecting loans and interest or who manage rental property.
The distribution of the employee's share in the profits takes place within five months afte the end of the fiscal year.
Some companies are exempt from distributing profits under special circumstances, as described by the laws.