Mexican tax system treats natural persons and legal entities for tax purposes. Both are subject to income tax (ISR) although at different rates.
To pay taxes, natural persons or legal entities in Mexico must be registered before SAT. It is a legal requirement for everybody having an income in Mexico.
Both natural persons and legal entities will receive a tax identification number or RFC (Registro Federal de Contribuyentes).
The RFC should be submitted whenever an electronic invoice valid for tax deduction purposes is issued when making a purchase. It is also used when issuing electronic invoices and when paying taxes.
Individual Taxes
Resident individuals are subject to Mexican income tax on their worldwide income, regardless of their nationality. Non-residents, who can prove residence for tax purposes in a foreign country, are taxed only on their Mexican source income.
Personal Income Tax
All income received by salaries, capital gains, bank interests, and real estate income is taxed in Mexico. The Mexican tax regime does not distinguish between earned income and capital gains for tax purposes.
If you bring over money from overseas, the Mexican tax authorities may require evidence that such money is taxed. Mexico has several tax treaties that may be applicable to avoid double taxation.
Income subject to taxes
SAT has the authority to detect revenues being earned and that taxes are duly paid. Most specifically, this authority detects the following:
- Income received from the sale of assets
- Income received from overseas
- Loans received
- Income received from business or professional activities
- Income received from the sale of goods or property
- Credits to bank accounts not evidenced by invoices
Deductions and allowances
You can have a number of limited income deductions in Mexico, including:
- School fees
- Business expenses,
- Medical costs
- Mortgage interest paid
- Insurance costs
- Taxes paid on income received from overseas where it can be proved that tax has been paid or when there is a double taxation agreement with the country in question.
You can find a full list of allowable deductions in accordance with article 25 of Mexico’s Income Tax Law.
Social security charges
Employers and employees are subject to social security and housing contributions.
The Income Tax Return
Natural persons and legal entities are required to file an electronic annual tax return before SAT. The return must detail all revenues received in Mexico and deductible expenses. The resulting figure must either be paid to or claimed back from SAT.
Tax summary
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Mexico tax year
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From 1 January to 31 December. Tax Filing and tax payment
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Tax return filing
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Most tax residents receiving income during the calendar year are required to file an annual tax return no later than April 30th of the subsequent year.
Taxes are subject to a progressive rate. Return rules
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Joint
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Joint returns are not allowed. Since income splitting is not allowed, personal service income should be declared by the spouse earning it. Foreign tax credit
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Worldwide income
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An individual tax resident in Mexico may credit the foreign income tax paid against the Mexican income tax liability if applicable.
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