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Taxation in Mexico

The tax closing date in Mexico is the 31st of December.
Tax payers are issued with a federal tax I.D. number when they register with the Ministry of Finance and Public Credit (SHCP).

There are four main types of taxpayer in Mexico, as outlined below:

• Corporations involved in commercial, industrial, agricultural, cattle, fishing and wildlife activities. Also included are branches and permanent establishments of foreign businesses or entities, and some nonprofit organisations and firms offering professional services
• Non-profit entities, including certain corporations or civil associations
• Mexican and/or foreign individuals living in Mexico, with respect to their income, regardless of the location of the source of revenue
• Corporations and individuals residing outside of Mexico with a source of income located within the Mexican territory

An individual is regarded as being a Mexican resident, and therefore subject to paying tax on their worldwide income, when they establish a permanent place of abode in Mexico. Also, corporations that have set up businesses according to Mexican laws, with the administration of the business being primarily carried out in Mexico are considered residents. You are a non-resident in terms of income tax purposes if you:

• Are physically present in a foreign country for more than 183 days a year

• Commute regularly to Mexico

• Are able to prove that you are a tax resident of another country

Non-residents are therefore only taxed on their Mexican income

Earned income includes salaries, commissions and allowances, including those for housing, living expenses, education, tax reimbursements, and amounts received as employee profit sharing.

As a Resident, you must include

1. income from investment in your annual returns, apart from interest gained from the Mexican bank system and government duties, which is either subject to a final withholding tax of 20 percent on gross interest or is exempt;

2. or the dividend income from Mexican companies or investment funds;

3. capital gains on business deals carried out through the Mexican stock exchange, which are exempt.

Income Tax

Non-resident individuals are taxed at a rate of between 3% and 33%, depending on their level of income.

Corporate Tax

The corporate taxation rate in Mexico is 30%.

VAT

VAT, known as IVA in Mexico, is levied on most EU goods at 16%.

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