Doing Business

Doing Business in Mexico 2015

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111 Doing Business in Mexico 2015 Chapter 13 Tax system Investor considerations • Resident taxpayers (corporate or individual) are subject to Mexican taxation on worldwide income. • Non-resident taxpayers (corporate or individual) are taxed on Mexican-source income only. • Corporate income is taxed at the corporate level. Beginning 2014, a 10% withholding tax is applied on dividend distributions to individuals and foreign residents (See Chapter 17). • Compulsory profit sharing, equal to 10% of taxable income as adjusted for this purpose, is payable each year to employees; and is deductible for tax purposes. • Flat Tax, which was assessed as minimum tax on enterprises, was repealed in 2014. Rights and obligations born within the repealed Law will be respected. • In general, form prevails over substance, although tax courts are increasingly basing their rulings on substance. • Thirty seven tax treaties are now in effect, and negotiations for tax treaties with other countries are in progress. • Double taxation relief is given by way of (limited) credit for foreign taxes paid. Principal taxes The principal taxes payable by commercial and industrial enterprises operating in Mexico and, in certain cases, by foreign companies and individuals, are those levied by the federal government. State and municipal governments have more limited tax powers and also receive allocations of some federal taxes collected within their borders. The principal taxes are as follows. 1. Federal taxes: a. Income tax; b. Value-added tax; d. Custom duties; f. Payroll taxes, mainly social security. e. Excise taxes on oil and gas production and on the extraction of mineral resources, as well as on some consumer goods (liquor and tobacco) and services (telephone and communications). 2. Local taxes: a. On real property; b. On salaries. 13

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