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FINANCE & TAX SERVICES

For industrial and IMMEX operations in Mexico.

OUR SERVICES

Our shared resource structure allows you to access fully trained and experienced staff without the cost of hiring full-time personnel.
Bookkeeping
Bookkeeping & Transaction Registration
PreOperativeEHS-1
Accounts Payable & Receivable
Payroll
Payroll Execution & Coordination
Audit
Internal & External Audit
Reporting
Tax Reporting & VAT Administration
Banking
Treasury & Bank Management

Taxes in Mexico

  • Income
  • Value-Added
  • Payroll Tax
  • Profit-Sharing
  • Interest, Royalties, Etc.
  • Property / Real Estate

Income Tax in Mexico is a federal tax payable at a flat 30% rate for corporations, like a direct tax on the profit obtained. Residents in Mexico, residents abroad with a permanent establishment in Mexico or sources of wealth in Mexico, are compelled to do monthly prepayments under certain business conditions to the Mexican SAT authority. Transfer pricing regulations in Mexico are ruled by the Income Tax Law and control transactions between related companies at local and international level. Maquila operations are specifically ruled by the Safe Harbor methodology which is to determine the taxable profit out of the higher amount between 6.9% of the total value of assets and inventories or 6.5% of the total amount of cost and expenses of the operations must be considered.

PERMANENT ESTABLISHMENT – (PE)

Any foreign resident, person or company, that is generating wealth through operations in Mexico, by itself or through others must tribute ISR upon the generated wealth that is attributed to the Operation in Mexico. The 2020 tax reform in Mexico nsolidifies the requirement for all foreign residents to obtain a tax ID in Mexico, even despite previous exemptions for Shelter service providers. 

 

Value-Added tax is payable at a general rate of 16% on sales of goods and services, import of goods and lease payments. Some exemptions apply such as the sale of medicines, food products, and related, primary sector activities such as agriculture and livestock, sale of land, residential construction and rentals, medical services, salaries and wages.

Declarations must be done monthly, and taxpayers can apply for a credit on the VAT paid on purchases and expenses versus VAT collected from clients on sales. Refunds of VAT are available for companies showing higher credits than collections.

VAT must be withheld in the following cases:

  • Commissions paid to individuals
  • Services provided by individuals
  • Tangible goods leased by individuals
  • Ground transportations of goods services (4% retention rate)
  • Outsourcing services (6% retention rate)
  • Waste purchases to be used in your industrial activity or for sales
  • Purchases to residents abroad without permanent establishment in the country

Payroll Tax is a state fee that is paid when carrying out transactions in the company’s labor relations. For example, the payment of wages and salaries, amount paid for overtime, seniority bonuses, are considered remuneration for the payment of this tax.

It is declared monthly to the Finance Secretary of the corresponding state, and ranges from 2-3%. The application of the tax starts from the first payment made to the workers. It varies according to the state, as well as the laws that support it, which are found within the Financial Code of each of them.

For the payroll tax calculation, the following premiums are declared:

  • Monthly, biweekly or weekly wages and salaries
  • Overtime work
  • Awards, bonuses, and incentives given to employees
  • Commissions
  • Compensations
  • Seniority premiums
  • Employer participation in savings fund
  • Payments made to administrators, managers or other workers of the company

Profit-Sharing Employers in Mexico are obligated to pay workers a share of the profits based on their annual tax declaration. The amount to be distributed among the workforce is 10% of the profits before income tax. It must be paid within 60 days of the annual declaration of taxes to the authorities.

Profit-sharing must be paid within 60 days after the payment or submission of the annual tax declaration even if there is an objection of the union or the employees. Also the employer has 10 labor days to deliver a copy of the annual tax declaration to the union or to the representative of the employees. 

For profit-sharing calculation, the following are considered:

  • The number of days worked by each one during the year
  • Proportional wages paid during the year

The profit distribution of each employee will be capped to the highest average of the profit-sharing received by the employees in the past 3 fiscal years or 3 months of its regular salary. 

Companies operating in their first year of operation can be exempt from profit-sharing. Directors, General Managers, and Administrators do not participate in profit-sharing of the company.

Interests, Royalties and Technical Assistance Fees interests paid to a resident abroad with permanent establishment in Mexico are subject to a withholding tax rate of 4.9% to 35%. Royalties paid to a resident abroad are subject to a withholding tax of 35% and the rate may be reduced with a tax treaty. Technical Assistance paid fees are subject to a 25% withholding tax, unless the tax is reduced with a treaty.

Property / Real Estate Tax in Mexico, the acquisition is between 2-4% of assessed value of the property at the moment of the purchase. Then it will be paid annually and is calculated at a fraction of the value of the property.

A cadastral appraisal has to be performed, which is a calculation that takes into account characteristics of a property, such as the unit values of the land and construction, multiplies them by the surface of the land, and the result determines the cadastral value, which is used to determine the amount of taxes that a person must pay for owning the property. The predial fee may vary according the location of the property.

How is the property tax calculated?

To calculate the property tax, the authorities take into account the following values:

  • Location of the property
  • Land value
  • Construction value
  • Property type
  • Property characteristics (number of floors, age, state of materials)
  • The land’s surface
  • Construction surface

These values are compared with a maximum and minimum range of the property price. Based on this result, and on the result of the cadastral appraisal, the value of the taxes that the owner of the property must pay is determined. This payment normally has to be performed in January and the municipalities may offer incentives or discounts for early payments, for example 20% discount of the fee.

Municipalities use the predial collections to improve or change some aspects of the city or the municipality.

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