Doing Business

Doing Business in Mexico 2015

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187 Doing Business in Mexico 2015 Double taxation relief Foreign source income is fully taxable in Mexico for tax residents. These are no exclusions except for those provided by tax treaties. The law provides relief from double taxation by allowing a limited foreign tax credit for taxes paid abroad by Mexican residents. In essence, the credit is allowed for foreign taxes paid up to the amount of foreign tax that would correspond to the income earned by a non-resident of that country or the actual amount paid, whichever is lower. Similarly, the law provides that tax treaty provisions override the provisions of the tax law, when they benefit the taxpayer. Tax computation A typical tax computation is illustrated in Appendix X. Personal allowances and credits The personal allowances and credits available are given in Appendix IX. For credits, also see below. Tax rates The tax rate schedule for individuals shown in Appendix VII has a maximum rate of 35%. Some examples of the amount of tax payable by individuals at different levels of taxable income are shown in Table XIII. XIII—Examples of Individual Effective Tax Rates Annual Income Ps Tax payable Effective Tax rate 100,000.00 8,924 8.92% 250,000.00 40,107 16.04% 550,000.00 120,851 21.97% 1,050,000.00 277,851 26.46% 2,100,000.00 634,851 30.23% 3,250,000.00 1,028,351 31.64% Tax credits An individual may claim a foreign tax credit in the annual tax return, subject to certain limitations, for any foreign income tax paid on foreign-source taxable income. 20

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