Reforms made paying taxes in Mexico easier for companies as the business flat tax was abolished—though they also made paying taxes costlier, as they allowed only a portion of salaries to be deductible.
There are several federal tax laws, which need to be taken into consideration for doing business in Mexico:
The Federal Tax Code provides the basic administration procedures applicable to federal tax laws. It defines the different types of taxes, taxpayers, domicile, residency, as well as rules relating to administrative procedures, litigation, penalties, reimbursement and compensation of taxes, statute of limitations and other related matters.
The following are key aspects of the Income Tax Law:
As part of the 2014 Mexican tax reform, the Federal Tax Code included a requirement for taxpayers to file accounting information with the tax authorities monthly.
Taxpayers are required to maintain accounting records through electronic systems that can create XML format files, which include the following:
Mexican transfer pricing provisions require that related parties charge an “arm’s- length” price for inter-company transactions.
Any transactions with Mexican or foreign residents which are related parties must be made at prices and terms like the ones that would have been used with unrelated parties.
A transfer pricing study is required to support the prices among related parties.
What are the details?
The following chart presents how many taxes and mandatory contributions the business must pay; how these taxes are filed and paid; and how much time taxpayers spend preparing, filing and paying three major taxes.
|Mexico City: Tax or mandatory contribution||Payments (number)||Notes on payments||Time (hours)||Statutory tax rate||Tax base||Total tax rate (% of profit)||Notes on total tax rate|
|Employer paid – payroll tax||1||online||3%||gross salaries||3.38|
|Corporate income tax||1||online||122||30%||taxableprofit||25.56|
|Employer paid: social security contributions||1||online||64||various rates||gross salaries||22.15|
|Property tax||1||online||various rates||property value||0.86|
|Vehicle tax||1||online||various rates||value of vehicle||0.04|
|Value added tax (VAT)||1||online||100||16%||sale price||0.00||not included|
|Employee paid: social security contributions||0||jointly||various rates||gross salaries||0.00||withheld|