Doing Business

Doing Business in Mexico 2015

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158 Tax and Legal Services - PwC Mexico In addition, the following tax rules apply to permanent establishments: • Procedures established for the determination of the balance of the net after-tax earnings account (CUFIN) or the capital remittances account (similar to the capital contributions account). These involve a procedure similar to that followed by Mexican corporations in determining the tax that may apply to dividend payments and capital reductions. • Remittances made to the home office for reductions of capital in Mexico are first considered to be from profits. Once these remittances exceed profits, the excess will be considered a reduction of capital. Any amount paid to the home office that does not arise from CUFIN or the capital remittances account results in additional income tax. This is payable at a 30% rate by the permanent establishment on a grossed-up amount arrived at by multiplying the total excess remittances by 1.4286 for 2014 Tax rates Branches and other permanent establishments of foreign corporations are taxed in the same manner as Mexican corporations. Therefore, the tax rate of 30% is applied to the income tax base, as described in chapter 15. Income from subsidiaries Mexican-source income not arising from a permanent establishment Mexican-source income of foreign corporations that do not have permanent establishments for income tax purposes in Mexico or, if they do, whose income is not attributable to such establishments is taxed separately, generally through withholding taxes applied at source. The rules referred to in this section are applicable to foreign corporations and also apply to non-resident individuals if they receive Mexican-source income. Nature of income Foreign corporations are taxed on their Mexican-source income received in cash, kind, services, or credit. Payments made for the account of the foreign corporation are also subject to tax. This includes traveling expenses of foreigners rendering services. Any income tax due from the foreign corporation that is absorbed by the Mexican company making payments to it is specifically considered as additional taxable income of the foreign corporation. Tax withholding Mexican taxpayers making payments to residents of foreign countries or their representatives should withhold and remit the corresponding income tax (see Appendix V). These payments are generally considered as final payments of the income tax, with no further obligations on the part of the foreign corporation. There are a few cases where a foreign corporation is permitted to pay taxes on net income, provided it has a qualified representative in the country (see below). The withholding taxes become an obligation at the time payments to the foreign residents become due (whether or not payment is actually made) or when the payment is actually made, whichever happens first. In most cases, the amounts of tax due are generally required to be remitted to the tax authorities during the first 17 days of the following month.

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