Mexico Tax Laws and Regulations
Mexican Tax Laws
With more than 20 years’ experience in the front rank of international payroll providers, Bradford Jacobs ensures our clients comply with every level of tax and employment law worldwide. Our ‘know-how’ is vital for foreign companies expanding into Mexico.
Dealing with tax, payroll, and employment regulations for your staff from overseas is a tricky process. It poses major issues for companies seeking to develop their international profile. Mexico is no exception. An already cumbersome and multi-layered income tax regime became more complicated with miscellaneous changes to the tax laws from January 2021. Incoming companies also must beware of variations in the rules between Mexico’s provinces.
Overview of Taxes in Mexico
|Residents’ Individual Income Tax:|
|Up to MXN 7,735 (US$384)||Exempt|
|Excess up to MXN 65,651 (US$ 3,270)||6.60%|
|Nine further tax bands up to|
|MXN 3,498,600 (US$ 174,293)||35.0%|
Value Added Tax: Federal Value Added Tax is 16%.
Corporate Income Tax (CIT): CIT is levied at 30% on a company’s worldwide income, which includes revenue from such as cash, goods, services, or credit.
Withholding Tax: Mexican companies generally withhold taxes from payments to foreign companies or individuals, but rates will depend on the countries involved. Typically, withholding taxes would be in the range of up to MXN 125,900 (US$ 6,272) exempt; excess up to MXN 1,000,000 (US$ 49,820) 15%; above MXN 1,000,000 30%.
Social Security Taxes: Employers remit an amount equal to roughly 23% of an employee’s salary to the Mexican Social Security Ministry, with employees contributing an extra 3%. Employers also contribute 5% of the employee’s salary to the Housing Fund. Employers add 3.15% of employees pay to the Retirement Fund, with the employee adding 1.125%.
Other Taxes: Wage payroll taxes are levied by most Mexican states at rates between 1% and 3%.
Luxembourg Individual Tax – Single, Married
Mexico residents pay tax on the worldwide income they earn in a calendar year, which is the same as the tax year, January 1 until December 31. Returns should be filed, and any due tax paid by April 30 of the following year. Most tax residents are required to file electronically after first obtaining their Advanced Electronic Signature (Registro Federal de Contribuyentes). Married couples do not file joint returns, but the highest earner can declare all their income.
Where residents or non-residents are paid by non-resident foreign companies, they must file a provisional monthly return with a payment equal to the withheld amount for that month. Payment must be made by the 17th of the following month.
Income taxes withheld by employers are remitted to the Tax Administration Service (SAT) at the Ministry of Finance and Credit (Secretaria de Hacienda et Credito Publico).
Resident Tax Rate
Income in MXN (Mexican pesos) and US$
|0.01 MXN||6,942.35 (US$342)||1.92%|
|6,942.36 MXN||58,992.27 (US$2,913)||6.40%|
|58,992.28 MXN||103,550.51 (US$5,114)||10.88%|
|103,550.52 MXN||120,372.95 (US$5,944)||10.88%|
|120,372.96 MXN||144,119.39 (US$7,117)||17.92%|
|144,119.40 MXN||290,667.83 (US$14,335)||21.36%|
|290,667.84 MXN||458,132.39 (US$22,626)||23.52%|
|458,132.40 MXN||874,650.11 (US$43,197)||30.00%|
|874,650.12 MXN||1,166,200.07 (US$55,127)||32.00%|
|1,166,200.08 MXN||3,498,600.11 (US$172,789)||34.00%|
|3,498,600.12 MXN||and above||35.00%|
Non-resident foreigners pay tax at either 15% or 30%. Up to MXN 125,900 (US$6,272) is exempt and the excess up to MXN 1,000,000 (US$49,820) is taxed at 15%. The excess above that is taxed at 30%.