Doing Business

Doing Business in Mexico 2015

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186 Tax and Legal Services - PwC Mexico Other income Other types of Mexican-source income, such as interest, rental income, capital gains, and royalties, are subject to tax, generally on a withholding basis, the same way foreign corporations do, as explained in Chapter 16. However, it should be kept in mind that, as mentioned at the beginning of this chapter, the provisions of the multiple tax treaties executed by Mexico should be analyzed, as these may provide a more favorable tax treatment. Deductions Business-related deductions Salaried employees are not allowed personal deductions of any sort for expenses that might be incurred in connection with their employment. Expenses directly related to the production of other taxable income, such as expenses of a professional practitioner or of an unincorporated business enterprise, expenses on rental property and the cost related to the sale of real estate property and shares are deductible when determining the taxable income, as discussed earlier in this chapter. Personal deductions and allowances Resident taxpayers may claim the following personal deductions when supported by the corresponding electronic invoices: • Medical expenses disbursed in Mexico, for the portion which has not been reimbursed by a medical insurance. These include medical, dental and hospital bills for the taxpayer, spouse or common-law spouse, descendants, parents, or grandparents, as long as the annual income earned by the family member does not exceeds one annual minimum wage. Medical insurance premiums are also deductible. Medicines are not deductible, unless included in a hospital bill. • Funeral expenses up to an amount not exceeding one annual minimum wage, applicable to the family members indicated above. • Charitable contributions to tax exempt organizations that are authorized to receive donations. • The paid mortgage inflation adjusted interest, related to the purchase or improvement of the taxpayer personal residence, subject to certain limits. • Complementary contributions to social security retirement fund (AFORE) or Mexican personal retirement account. This deduction is capped at 10% of individual's taxable income and the contributions must not exceed five times the annual minimum wage of the taxpayer's geographical area. • School transportation for economic dependents, when it is mandatory by the institution. • Also based on a presidential decree, the school tuition paid may also be deducted in the annual tax return, subject to certain limits. The total personal deductions amounts for the year is limited, therefore it may not exceed the lesser of the following: • Amount equivalent to 4 times the annual minimum wage that corresponds to the geographical area of the taxpayer • Amount equivalent to 10% of the taxpayer´s gross income, including exempt income. The Contributions to personal retirement accounts, charitable contributions and school tuitions are not considered for the limit indicated above regarding personal deductions

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