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Tax system in Mexico

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Do I have to pay taxes in Mexico? What are the different taxes that apply in Mexico? Here are the answers to your queries.

Mexico's fiscal year starts on January the 1st to end on the 31th of December of the same year. Income tax and corporate tax are the Federal government's main source of revenue. As regards Mexican States and Municipalities, their power is most restricted. These are not allowed to receive income tax or corporate tax. Hence, there are two categories of taxes: federal taxes and local taxes.

Federal taxes consist of income tax mainly based on active revenue, Value Added Tax (VAT) which is known as the Impuesto al Valor Agregado (IVA), import and export taxes, as well as social charges applying to you salary, social security and other social contributions.

Local taxes, on the other hand, involve real estate property and employers' contributions, etc.

Register with the Federal Register of Taxpayers

You are required to register with the Federal Register of Taxpayers (FRT) http://www.sat.gob.mx/Paginas/Inicio.aspx within 10 days following your arrival in the country. You can proceed online or at the ''Administración Local de Servicios al Contribuyente'' office on appointment. Documents to be produced are:

  • your birth certificate
  • proof of address
  • your identity card or passport
  • your file number if you have already registered online
  • otherwise, a procuration letter referred by a public notary or the fiscal department, as well as two witnesses and concerned companies to be officially named as their legal representative.

Once you are done with these, you will receive a copy of your application, a tax identity card and a user guide. The yearly income declaration may vary between once a year, every month or each two months, according to your status (employee, professional, owner of a real estate property, etc.). In case of any change in status, you will have to notify the FRT (suspension from work, resuming work or any other change which could alter your fiscal obligations).

Types of tax payers

There are four distinguish taxpayers groups in Mexico: Mexican companies and associations which are equally subject to tax, Mexican residents regardless of their nationality, foreign companies and non-residents who are attached with local companies, and finally non-profit organizations.

Income tax

Mexican taxpayers have to pay income tax on their whole income, regardless of its origin. Note however, that businessmen having made a more than 183 days business trip in Mexico may be entitled to an exceptional tax rate. But this does not apply to permanent residents. Income tax is deducted at the following rates:

1,92 % - 1 to 5 953 pesos
6,4 % - 5 954 to 50 525 pesos
10,88 % - 50 526 to 88 793 pesos
16 % - 88 794 to 103 218 pesos
17,92 % - 103 219 to 123 580 pesos
21,36 % - 123 581 to 249 243 pesos
23,52 % -249 244 to 342 842 pesos
30 % - more than 342 843 pesos.

As for non-residents, they will have to pay tax only on their Mexican source revenue. They are eligible to standard rates which apply to different types of gross salaries without deduction. But in some cases, non-residents may have to pay higher rate taxes on benefits such as sale of real estate property or actions, or other types of constructions. However, they are not required to submit an annual tax return.

Foreign companies

Moral and non-resident expatriates in Mexico have to pay income tax at a fixed rate if they are receiving a salary or other wages from a Mexico-based company.

Corporate tax

Corporate tax rate is fixed at 35%. Once the company has paid income tax, shareholders may be entitled to benefits. But if the company shares revenue which has not be accounted in its income tax, it will have to pay an additional 35% tax on the shared sum.

Moreover, tax assets represent some 2% of the company's, organization’s, branch's or permanent establishment’s assets. Owners will also have to pay a Federal income tax. The global revenue tax will be superior only if it exceeds ordinary income tax.

In other words, a sum which is equal to ordinary income tax will be deducted from your 2% minimum tax for the current year and the five preceding years.

Note that the company's net income is tax exempt.

Non double taxation agreements

Mexico has signed non double taxation agreements with some thirty countries:

Australia, Austria, Belgium, Brazil, Canada, Chile, China, Czech Republic, Denmark, Ecuador, Spain, Finland, Germany, Greece, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Norway, New Zealand, the Netherlands, Poland, Portugal, the United Kingdom, Romania, Russia, Singapore, Slovakia, Switzerland and Sweden.

 Useful links:

Federal Register of Taxpayers (FRT) www.sat.gob.mx/English
Fiscal responsibilities www.sat.gob.mx/informacion_fiscal
Finance and Public Credit Secretariat www.shcp.gob.mx
Appointment for FRT registration citas.sat.gob.mx
Los impuestos – where to send your tax return losimpuestos.com.mx
Mexican Financial Information Norms Council www.cinif.org.mx
Mexican Public Accountants Institute imcp.org.mx

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1 Comment
quemex
quemex
2 years ago

This does not reflect useful information for retired Canadians residents of Mexico who do not have any income from Mexico (only live on their Canadian pension). That is my case. My Canadian pensions (Public Service Pension, Canada Pension Plan, and Old Age Security Pension) are all deposited directly into my Canadian bank account (I also have a Mexican bank account for local use to which I transfer funds once in a while). The 15% Canadian federal income tax required by the Canada-Mexico Agreement is taken at the source for all my pensions, so the amounts deposited each month in my Canadian bank account are "net". So, as my non resident taxes to Canada have been paid before pension deposits, and I have no income in Mexico, I have no more income tax reports to file, neither to Canada, nor to Mexico. And, by the way, the 15% non resident Canadian federal income tax I pay under the Canada-Mexico Fiscal Agreement is less than half than what I would pay in federal and provincial taxes in my Province of origin if I still lived there !!

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