Taxes in Mexico: An Introduction

Word to the Wise

This guide to taxes in Mexico has been prepared to assist those interested in doing business in Mexico, or those whose professional activity brings them to this country, and for whom knowledge about taxes and taxation in Mexico would prove to be very beneficial. It does not pretend to fully cover the subjects it treats, but is intended to answer some of the important, broad questions that often arise. In order to deal with specific problems, it is necessary to refer to the laws and regulations of the country and to obtain appropriate accounting and legal advice.

Introduction

The Mexican tax system has been subject to comprehensive tax reform legislation. This legislation, enacted principally in 1986, 1988 and 1994, has dramatically changed the tax laws in an attempt to make the system competitive with the tax systems of Mexico's most important trading and investment partners as well as with the systems of countries competing with Mexico for foreign investment.

Principal Taxes in Mexico

The principal taxes payable by individuals and by corporations operating in Mexico and, in certain cases, by foreign companies, are those levied by the federal government.

State and municipal governments have more limited taxing powers and until now have never levied general corporate income taxes; some states tax employers on salaries and professional fees paid by them. The principal taxes are as follows:

Federal Taxes:

1. Taxes on income, including a minimum tax based on assets held;
2. Value-added tax;
3. Import and export taxes; and
4. Payroll taxes, social security premiums, mandatory retirement savings system, and contributions to the National Workers' Housing Fund.

There are some special federal taxes on a few specific products and services, such as alcoholic beverages, cigarettes, gasoline, telephone service, automobiles, etc.

Local taxes:

1. On real property;
2. On salaries; and
3. On acquisitions of real property.

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