Doing Business

Doing Business in Mexico 2015

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182 Tax and Legal Services - PwC Mexico Calculation of tax A portion of the taxable capital gain from the sale of shares, real estate and other assets is added to other ordinary taxable income in the annual personal income tax return. The remaining portion of the taxable gain is subject to tax at a flat rate which is the resulting effective rate of tax payable by the individual on the total income reported in the annual tax return. The individual also has the option to apply a flat rate based on the average effective tax rate from the preceding last 5 years. The portion of taxable income to be added to the other ordinary taxable income in the annual personal income tax return is determined by dividing the total capital gain between the number of complete years that the stock was held, up to a maximum of 20 years. For example, in the case of an asset held for more than 20 years, only 5% of the taxable gain must be added to ordinary income and the flat rate will apply to the remaining 95%. Losses on sales of real estate and shares are partially deductible. The immediate deductible portion of the loss is determined on the basis of the number of years the asset was held (not to exceed ten). This portion may be deducted from other types of investment income (except salaries, professional fees and business activities) declared in the current annual tax return or from capital gains for the following three calendar years. The remaining portion of the loss which may not be deducted in the current annual tax return originates a tax credit which may be applied against other capital gains tax in the same year or in the following three years. Gains on the sale of shares through stock exchange Individual residents in Mexico and abroad are subject to tax on the gain related to sales of the shares of Mexican and foreign business entities, certificates of deposit for those shares and capital derivative financial operations (DFO's) referred to shares and share indexes carried out through stock exchange or Mexican derivatives markets, equivalent to 10% of the gain. Tax resident individuals must determine the tax payable for the period in a tax return to be filed along with the annual income tax return. The annual tax on gain, including gains generated at foreign stock exchanges or markets related to shares of Mexican corporations, is definitive. Losses resulting from the sale of shares and DFO's on a stock exchange or derivatives market may be applied to the actual tax year gains or the following 10 years. In case of non-resident individuals for Mexican tax purposes, the intermediary must withhold the corresponding tax on the resulting gain for each transaction, without deducting any loss. No tax should be withheld by the intermediary if the non-resident individual provides a statement specifying that he is a tax resident of a country which has a tax treaty with Mexico. In order to determine the gain or loss on the sale of shares, the acquisition cost, plus any commissions paid, restated for inflation can be deducted. In case the shares were purchased prior to 2014, there is an option to determine the cost which would be the average of the 22 most recent closing prices of the shares, unless such shares are unusual due to the value, number or volume of operations regarding the previous 6 months. In these cases, the average for the preceding six months may be used.

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