Doing Business

Doing Business in Mexico 2015

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115 Doing Business in Mexico 2015 Non-profit organizations Under the law, a limited number of organizations and government agencies are exempt from taxes. These include formally registered political parties, the federal, state and municipal governments and their agencies not engaged in business activities. Other non-profit organizations are generally considered non-taxpayers, rather than as exempt from tax. These include a limited number of civil societies and civil associations that are specifically designated as such, although they are required to file annual returns on a calendar-year basis to determine their net excess of income over expenses, and their members are subject to tax only as to any amounts of net income actually distributed. These organizations are relieved of any obligation for advance payments of tax on their operations. The following types of entities are considered non-taxpayers: • Chambers of commerce, of industry, etc.; labor unions; employer, professional, cooperative, and agricultural associations. • Charitable organizations and those established for scientific, political, sports, or religious purposes. • Consumer cooperatives, civil associations or societies engaged in education, if officially recognized and civil societies organized solely to operate savings funds. • Civil societies and civil associations which grant scholarships, as well as entities engaged in the research and conservation of flora and fauna. Notwithstanding the above, certain types of income of non-taxpayers are subject to income tax, including unrelated business income. Taxable income Taxable income is gross income, which includes any kind of income unless specifically excluded, less allowable deductions and unexpired net operating loss carryovers from prior years, as well as employee profit sharing. Gross income also includes the taxable annual inflationary adjustment, if any. The deductible annual inflationary adjustment, if any, is fully deductible. See Chapter 15 for a discussion of these items. Tax year The government's fiscal year is the calendar year, which must also be used by all taxpayers for corporate, legal and income tax purposes. Sole proprietorships and non-profit organizations must also use the calendar year. Tax-free zones Free trade zones have been replaced by the border region concept (these are discussed in Chapter 8). Tax holidays There are no income tax holidays for domestic or overseas investors in Mexico. 13

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