Doing Business

Doing Business in Mexico 2015

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178 Tax and Legal Services - PwC Mexico Territoriality and residence Residents of Mexico Resident individuals are subject to Mexican tax on their worldwide income, regardless of their nationality. The tax applies at graduated rates ranging from 1.92% to 35% for 2014. Residents are granted a foreign tax credit with respect to their foreign-source income. Non-residents, including Mexican citizens residing abroad, are usually taxed only on their Mexican-source income, as discussed below. Mexican nationals are assumed to be residents for tax purposes, subject, however, to proof to the contrary, such as acquiring residency for tax purposes in another country. The Federal Tax Code provides that a person is a resident of Mexico when he establishes a home in Mexico. If the individual has a home in another country, then the individual is a resident in the country where he has his center of vital interests. A person is considered to have his center of vital interests in Mexico if either: 1. More than 50% of his income comes from Mexican sources in the calendar year, or; 2. Mexico is the primary place of his professional activities. For this purpose, salary income would be considered Mexican source to the extent the services are rendered in Mexico, no matter who pays the salary. The definition of home as used in the Federal Tax Code is not entirely clear, but it is generally believed to be an abode that it is permanently available to the individual A number of factors should also be considered, such as the type of living quarters occupied in Mexico, i.e., on site facilities provided by employers, transient quarters, etc Nonresidents of Mexico Foreigners working in Mexico on short-term visits are usually not considered residents of Mexico for tax purposes. Other non-immigrants entering the country for longer periods of time would remain as non-residents unless they establish a home in Mexico. Non-resident individuals are not subject to Mexican taxation when paid from abroad by a non-resident employer that does not have a permanent establishment in Mexico, as long as they are present in Mexico for less than 183 days in any 12-month period. If their stay exceeds 183 days, they will be required to pay Mexican tax on their monthly salaries from the beginning of their stay. In the event that the non-resident has to pay taxes in Mexico, the tax would be determined in accordance the graduated rate table shown in Appendix V. The table includes an exempt amount, and the balance is taxable at 15% or 30%, depending on the cumulative income level during a 12-month period. The tax paid is considered final; therefore, non-residents do not file an annual tax return.

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