Mexico has a complex tax system, in this article will be explained an overview of the main taxes in Mexico.
The Income Tax or Impuesto Sobre la Renta (ISR, acronym in Spanish), is the 30% of the corporation profit. This tax is paid annually, but estimated advance payments need to be done in monthly bases. The tax profit is calculated as follow:
Taxable Revenue ( – ) tax deductions = tax profit
Value Added Tax (VAT)
The Value Added Tax is an indirect tax that is apply in the consumption of goods or services. The standard rate is 16% but some activities can be tax in 0% rate or are exempt of VAT. There is also a geographic zone in The north and south of the country with a 8% rate.
The payable VAT is determined as follow:
Out VAT (VAT Collected in sales) – Input VAT (Vat paid in purchases and expenses) = Payable VAT
The Special Tax on Productions and Services, known in Mexico as IEPS taxes different products such as: alcoholic beverage, high sugar content products, tobacco, and others. The tax rate of this tax is from 3% o 160% depending on the service or product. Special reports must be presented depending on the activity.
All the employees in Mexico needs to be register in the social security and contributions must be paid. Social security grants health services, retirement funds and other services to the employee. The contributions are calculated ion base of the salary, and the rate can be approximately from 22% to 30%.
Payroll State Tax
This is a state contribution calculated in base of the total revenue of the employee, the rate is around the 2% to 3% depending on the State the employee is register.
If you want more information regarding the main taxes in Mexico, please contact us.