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Mexico Tax and Tax Laws













Mexico Tax rates 2016


Last partial update, August 2016.

Individual Income Tax: Mexico's individual income tax rates for 2016 are progressive, from 1.92% to 35%.

Mexico Personal annual tax rates 2016(MXN)


Income (MXN) %
1 - 5,953 1.92
5,954 - 50,525 6.4
50,526 - 88,793 10.88
88,794 - 103,218 16
103,219 - 123,580 17.92
123,581 - 249,243 21.36
249,244 – 392,842 23.52
392,843-750,000 30
750,001-1,000,000 32
1,000,001-3,000,000 34
3,000,001 and over 35


Note: Non-residents pay 15%/30% on their employment income in Mexico. The first MXN 125,900 are tax exempt subject to terms.

Corporate Tax: Mexico's corporate tax rate for 2016 is 30%.
Capital Gains: Capital gains of companies are added to the regular income.
Individuals: Gains from sale of securities in the Mexican stock exchange are taxed at 10%.Sale of the principal residence is tax exempt subject to certain terms.


Residence

A foreign company is resident if managed in Mexico.
An individual is resident when holding a home in Mexico or when the center of life is in Mexico
Resident companies and individuals pay taxes on their worldwide income too.


Mexico Tax Deductions

  • Losses are carried forward up to ten years. There is no carry back of losses.
  • Depreciation is deducted using the straight line method. The depreciation rates are as follows:
    • Machinery- 10%
    • Furnitue-10%
    • Buildings- 5%
    • Cars and Trucks- 25%
    • Computers- 30%.
  • There is optional company consolidation for tax purpose in Mexico.
  • Thin capitalization rules relating to interest expenses are in effect in Mexico with 3:1 debt to equity ratio for loans from related parties.
  • Donations are tax deductible for up to 7% of previous year taxable income.


Mexico Personal Credits and Deductions

There is a tax credit for each dependant.
Education expenses are deductible, up to a limit.
Deductions are also permitted for social security payments by an employee, and payments to private pension plans, up to a limit.
Funeral expenses are tax deductible up to a limit.
Medical expenses are deductible subject to a ceiling.
Donations to organizations, subject to terms, are tax deductible.


Deduction of Tax at Source

In Mexico tax is deducted at source from the following payments to non residents:
Dividend- 10%.
Interest- 4.9%-40%.
Royalties- 25%/35%/40%.
Technical Services -25%.
Branch Remittance Tax -20%.


Social Security

The contributions by the employer and the employee are subject to ceiling defined by law covering retirement fund, housing fund, death and inability.
The payments are divided roughly to two thirds by the employer and one third by the employee.
Payments to social securities are due on a monthly basis.


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