Doing Business

Doing Business in Mexico 2015

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205 Doing Business in Mexico 2015 Appendix III Corporate income tax and employee profit sharing calculations 2014 Taxable income Profit-sharing Net income per books before taxes Ps 10,000,000 Ps 10,000,000 Add- Non-deductible expenses: Excess provision for bad debts over specific losses deductible 180,000 180,000 Entertainment and other miscellaneous non-deductible expenses (Note a) 920,000 920,000 Inflationary annual adjustment (Note b) 200,000 200,000 Taxable inventory (Note c) 1,400,000 1,400,000 Non-deductible exempt salaries (47% or 53%) [*3] 500,000 13,200,000 12,700,000 Deduct: Depreciation of fixed assets, adjusted for inflation, in excess of book depreciation 300,000 300,000 Taxable Income 12,900,000 12,400,000 Employee profit sharing paid in the year (based on prior year results) (*1) 100,000 NOL's amortized from prior years (*2) 120,000 Net taxable income 12,680,000 12,400,000 Corporate income tax @ 30% 3,804,000 Employee profit sharing @ 10% 1,240,000 * The only differences between the tax base for income tax and Employees' Statutory Profit-Sharing (ESPS) are: 1. ESPS paid in the period 2. Amortized tax losses 3. 47% or 53% of non-deductible exempt salaries 4. Historic immediate depreciation for fixed assets deducted in prior periods. Notes: a. Includes non-deductible travel expenses and automobile depreciation that do not meet all deductibility requirements. b. Inflationary annual adjustment is calculated on an annual basis taking the monthly average of accounts receivable and liabilities and applying the annual increase in the National Consumer Price Index. c. As from 2005, the deduction of purchased merchandise was replaced by a deduction of the Cost of Goods Sold. Such cost will be deductible in the year in which the income arising from the sale of goods is recognized. Special provisions apply for the inventory that was acquired before December 31, 2004, to proportionally increase include the inventory deducted as taxable income through 2016. III

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