Tax In Mexico

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in Mexico is complying with the country’s tax system. As well as paying tax in Mexico, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.

How do I calculate my taxable income: 

If you’re working in Mexico under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Mexico for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Mexico, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in Mexico through PAYE is left with the prospect doing everything themselves.

Do you know much about Mexican Tax Law? Does Mexico have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Mexico can range from 1.92 to 35 percent (for residents), or 0 to 30 percent (for non-residents), and you need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in Mexico, we can supply it to you free of charge. 

Using an Umbrella Company for Income Tax : 

Contractors in Mexico are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Mexican umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Mexican taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Mexican tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in Mexico, many of whom are experts in tax and immigration laws. If you have any questions about tax in Mexico, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Mexican work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Mexico but without the overhead of directly dealing with the Mexican tax authorities. Get in touch with us today for some reliable advice on tax in Mexico!

 

When Do You Need to Lodge Your Tax Return?: 
30 April
Tax Filing Deadline : 
30 April (no extensions permitted)
Can you file it online? : 
Yes, https://www.siat.sat.gob.mx/PTSC/
Currency: 
Mexican Peso (MXP)
Tax-free Threshold in: 
None (for residents); MXP125,000 (for non-residents)
Grossed Income: 
Residents
Grossed Income: 
0.01-496.07
Tax Rate: 
1.92%
Grossed Income: 
>496.07-4,210.41
Tax Rate: 
6.4%
Grossed Income: 
>4,210.41-7,399.42
Tax Rate: 
10.88%
Grossed Income: 
>7,399.42-8.601.5
Tax Rate: 
16%
Grossed Income: 
>8,601.5-10,298.35
Tax Rate: 
17.92%
Grossed Income: 
>10,298.35-20,770.29
Tax Rate: 
21.36%
Grossed Income: 
>20,770,29-32,736.83
Tax Rate: 
23.52%
Grossed Income: 
>32,736.83-62,500
Tax Rate: 
30%
Grossed Income: 
>62,500-83,333.33
Tax Rate: 
32%
Grossed Income: 
>83,333.33-250,000
Tax Rate: 
34%
Grossed Income: 
>250,000
Tax Rate: 
35%
Grossed Income: 
Non-Residents
Grossed Income: 
0-125,900
Tax Rate: 
0%
Grossed Income: 
>125,900-1,000,000
Tax Rate: 
15%
Grossed Income: 
>1,000,000
Tax Rate: 
30%
How long does it take to set up: 
8 days
How much does it cost: 
MXN27,686.50 - MXN27,756.50
Is it easy? : 
Starting a Business Rank: 90/190 (Source: World Bank)
How to File Taxes in: 

Step 1: Register with the Federal Register of Taxpayers (FRT) within 10 days following your arrival in the country.

Registration provides you with a RFC (Clave en el Registro Federal de Contribuyentes – Unique Key of Population Registry) which you can use to file taxes. A RFC is a unique number assigned to each person enrolled in the Registry. To obtain a RFC, a CURB is required, which can be obtained here.

You can register with the FRT here, or at a “Administración Local de Servicios al Contribuyente” office.

Prepare the following documents for registration:

  • Birth certificate or CURP

  • Proof of address

  • Government-issued identification e.g. passport

  • Online pre-registration number (if applicable)

Step 2: Determine whether you are required to file taxes.

Residents are required to file an annual income tax return under certain conditions. Non-residents are generally not required to file an income tax return because monthly withholdings are considered ‘final’.

Residents

You are not required to file a Mexican annual income tax return if:

  • You received only exempted income;

  • Your income tax withheld is considered final;

  • You only receive wages and salaries amounting to less than MXP400,000, provided (i) you did not work for 2 or more employers simultaneously during the year (ii) you were employed at the end of the year and (iii) such income is not derived from foreign sources or from entities with no withholding obligations; or

  • Your combined salary and interest income does not exceed MXP400,000, provided that (i) your actual interest income does not exceed MXP100,000 and (ii) tax on your actual interest income has been withheld.

Step 3: File taxes online here.

Step 4: Paying Taxes

Residents need to file their own taxes monthly if they receive compensation from abroad. The deadline for paying taxes or remitting withholdings is the 17th of the month following the month in which the income was received.

Non-residents should pay tax within 15 days following the receipt of income, unless their employer has a withholding obligation in which case, the due date is the 17th of the following month.

Notes: 

Different tax rates apply for residents and non-residents.

Employment subsidies: Employees with a monthly salary income less than MXP7,382.34 may be entitled to receive an employment subsidy against monthly withholdings and their annual tax liability.

Does the 183 day rule apply in: 

No.

When do you become a tax resident in: 

You become a tax resident when you:

  • Establish Mexico has your place of abode; or
  • Establish Mexico as your centre of vital interests (if you have a place of abode in another country).

Mexico is your centre of vital interests if:

  • More than 50% of your total income received during the calendar year is from Mexican sources; and/or
  • Mexico is the main centre of your professional activities.
Am I taxed on my global income in: 

Residents are taxed on their global income.

Non-residents are only taxed on Mexican-source income.

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