Doing Business

Doing Business in Mexico 2015

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177 Doing Business in Mexico 2015 Chapter 20 Taxation of individuals Tax planning for expatriates • There are no special tax concessions available for foreign nationals other than those established in tax treaties that Mexico has entered into. • Residents are taxed on worldwide income; non-residents are taxed only on Mexican-source income. • Residents are subject to a tax table of progressive rates. Non- resident employees are subject to tax at graduated rates that are significantly different from the resident tax rates. • Salaries paid by a non-resident employer who does not have a permanent establishment in Mexico to a non-resident employee rendering services temporarily in Mexico are exempt if the non-resident employee is physically present in Mexico for less than 183 days, consecutive or not, in any 12-month period. • Timing of arrival and departure could result in significant savings. • Joint returns are not allowed. Investment income of a non- working spouse is not includable in the other spouse's return, except under specific circumstances. • Planning the timing of major transactions, such as the exercise of employee stock options or the liquidation of an investment, before establishing residence in Mexico, is essential. • Moving expense reimbursements for specific out-of-pocket normal moving expenses are not taxable. Deferred compensation paid from abroad after departure is not taxable if related amounts are not cross charged or billed to the local affiliate or allocable to a Mexican permanent establishment of the foreign employer, unless paid within 6 months of departure. A large network of tax treaties has been entered into with several countries. (See Appendix VI). 20

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