Tax System in Mexico

The Mexican tax system has a reputation of not being easy to handle. The tax reform in 2014 aimed to increase fiscal revenue and to limit special arrangements. We would like to give you a short overview of the most important tax categories.

Corporate tax

The corporate tax rate, in Spanish “Impuesto Sobre la renta (ISR), is 30% of the income. Associated companies can profit from group taxation (“regimen opcional para grupos de sociedades”) if the parent company holds a share of at least 80% for the subsidiary. The unlimited settlement of dividends and taxes is not allowed. The yearly tax declaration for corporate taxes have to be handed in at the SAT until the 31st March of the subsequent year. The higher the income, the higher the tax rate.

Capital gains & Dividends

A withholding tax of 10% will be levied on dividends paid to a domestic or foreign natural person.
Capital gains from natural persons selling listed shares will be taxed with 25% on sales revenues or 35% on sales profit.

Customs

Mexico is a member of various free trade agreements, NAFTA being probably the most important one. NAFTA is a free trade agreement between Canada, the US and Mexico and allows customs-free import and export of products. Since its implementation, US manufacturing exports to NAFTA have increased by 258%.

Value added tax

The value-added tax, in Spanish “Impuesto al Valor Agregado (IVA)”, is 16% across the country. Mexico has a system of input tax deduction.

Income tax

Mexican residents, no matter their nationality, are subject to Mexican income tax on their worldwide income. Residents and thus subject to taxation are foreigners having their normal residence in Mexico except they reside more than 183 days/calendar year abroad and can prove their revenues in another country.

Non-residents are only subject to Mexican income tax with their Mexican income.

Further questions? WMP Mexico Advisors is happy to help you on-site. Learn more about our service as tax consultants in mexico.