Mexico presents an opportunity for skilled contractors in many different industries. To be able to work there long-term, you will have to meet all the immigration requirements. If you are contracting in Mexico, you will discover a country with a low cost of living and friendly residents.
It will be necessary to speak Spanish, but English is also spoken so it is not a huge barrier. This guide will cover what you need to know as you prepare for contracting in Mexico.
Do I need a visa to be a contractor in Mexico?
Citizens of some countries like the US and UK can visit Mexico for up to six months on a tourist visa without working. There are no ‘self-employment’ visas, so this will mean that you will need a sponsor from a legal Mexican entity to even consider working inside the country.
If your client is willing to sponsor your visa, you have to apply for it at a consulate inside your own country, although you can wait in Mexico while it is being processed. This guide will outline all the visa requirements, taxes and compliance issues while contracting in Mexico.
How do I get paid as a contractor in Mexico?
The visa requirements will determine how you work and get paid by your Mexican clients, as well as your experience contracting and commitment to Mexico.
Work as a self-employed freelancer
You will not want to risk working under a tourist visa, so freelancers would generally need to convince their clients to hire them as an employee and then sponsor their visa. This is not a bad option if you can commit to one client and receive employee benefits and labour protections.
Set up your own limited company
There is a visa and also a resident permit for those who want to set up their own company, and you can do that as an individual. This is a better option for those looking for long-term opportunities as there are numerous registration requirements.
Work with an umbrella company in Mexico
Because of the immigration requirements, the best way to get paid in Mexico is with an umbrella company. The umbrella company will sponsor your visa while taking care of all the tax withholding and social contributions from your client payments.
How do taxes work for contractors in Mexico?
Because your only practical solutions for working in Mexico are either as an employee of your client or an umbrella company, you will be paying employee income tax rates, which will depend on your residency status.
Tax residency rule in Mexico
Mexico takes a unique approach to tax residency and does not use the common 183-day rule. You are a tax resident if:
- More than 50% of your annual income is from Mexican sources; or
- Mexico is the primary place for your professional activities
Most long-term contractors would meet these residency criteria.
Tax rates in Mexico range from 2%-35% for residents. For non-residents, a flat 15% rate will be applied to income from MEX 125,000 to MEX 1 million, and 30% after that.
How to file taxes in Mexico
Step 1: Register with the Federal Register of Taxpayers (FRT) within 10 days following your arrival in the country.
Registration provides you with an RFC (Clave en el Registro Federal de Contribuyentes – Unique Key of Population Registry). The RFC is a unique number given to everybody and used to file taxes. To obtain an RFC, a CURB is required, which can be obtained here
You can register with the FRT here, or at an “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 have 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’.
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 entities with no withholding obligations; or
- Your combined salary and interest income do 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 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.
What are the social security contributions in Mexico?
Because your two primary options for working in Mexico are essentially employee roles, you will pay the social security contributions similar to other workers. The contribution rates are measured against a maximum earnings rate that fluctuates each year, and there is a maximum contribution amount.
Employer contributions: 7.58%
Employee contributions: 1.65%
Can I work remotely for a company in Mexico from my home country?
If the visa requirements are too much to overcome, or if you just want to stay in your own country, there is another option. Working remotely is on the rise, and it is possible that your Mexican client would permit that. Some roles are well suited to remote work, and if you demonstrate that you can perform at a high level, it is a great way to at least start working with clients.
Your Mexican client would pay your invoices just like any business, and you would handle all of your taxes and contributions in your home country. There would be no additional compliance steps for your client as a foreign business.
How do I stay compliant while contracting in Mexico?
As a foreign contractor, you will be concerned about compliance with Mexican law and regulations. Your primary compliance risks are:
- First, meeting tax and social contribution requirements
- Then, business registration and residency for limited companies
- Finally, work visa validity and sponsorship
That is a lot to overcome, especially for new contractors, and you might need the help of an umbrella company. Contractor Taxation has licensed, verified umbrella companies in Mexico who are ready to assist you with setting up your contract and making sure that your payments are secure. Here are some of the benefits you get as a result of using an umbrella company:
- Handles all client payments, tax withholding and any social contributions
- Issues you a payslip each month, to a Mexican or foreign account
- Can sponsor work permits
- Helps set up the Mexican contract with the client
- Moderates any disputes with your client
- Advises on access to totalization and double taxation treaties
Unless you are prepared to handle all of this on your own, you may find that an umbrella company is a valuable partner in Mexico as you embark on your contracting journey in a new country. Please contact Contractor Taxation with your questions about how an umbrella company can work for you.