Individuals or entities (companies, associations, or partnerships, among others) that are governed by the legislation of another country in light of their nationality, domicile, residence, seat of operation, and other criteria, shall be deemed foreign nationals for taxation purposes. In order to explain the applicable tax regime, foreign nationals are distinguished as residents in Mexico or residents abroad.
The tax legislation deems the following persons as residents in Mexico:
There are differents tax sheme for foreigners, but depends of the type of business used, through the employment of a subordinate agent, the establishment of a Mexican company or the acquisition of shares in an existing Mexican company. The use of any of these methods will create a permanent establishment and will have the following tax regulations:
A corporation tax must be paid annually on the taxable profits of the company. Such gains are calculated by deducting certain allowable expenses from total cumulative income. Most of the company's revenues are considered cumulative for income tax purposes at the time the invoices (CFDI) are issued or when goods or services are delivered to the buyer if no invoice is issued. Basically, allowable deductions are all discounts and / or expenses "strictly necessary" for the operation of the business.
With the exception of the first year of operations, all Mexican corporations must file their income taxes through monthly provisional payments. These interim payments will be credited against annual tax returns. The rate of the income tax in Mexico is 30% for companies, and 35% for phisical persons.
When the Mexican company transfers or leases goods or services in Mexico, it will be obliged to pay Value Added Tax (VAT). This tax is 16 percent of the price of the goods or services and can be transferred to
customers by including the tax on your billing invoices. In addition, if such goods and services are exported from Mexico, VAT is zero percent.
Collection in Mexico of the Special Tax on Production and Services (IEPS) to public telecommunications networks. The IEPS to telecommunications, of 3%, applies since 2010 to all services related to public networks such as fixed telephony, mobile telephony and pay television. The data transmission services (internet) are exempt from IEPS.
The company is subject to a state state payroll tax, at a rate that depends on the worker's salary. The federal government also imposes on corporations with social security contributions, which must be paid by the employer for illness, maternity, old age, death, child care and retirement. The employer must also contribute a fee from the Worker's Housing Institute for each worker's salary. Payroll taxes and fees are deductible for income tax purposes.
In addition to the tax provisions discussed above, there are also several provisions under Mexican law and different tax treaties that apply specifically to foreign companies earning income in Mexico. These provisions cover areas such as withholding obligations in front of the tax authorities of each country, available tax credits and taxes on dividends and royalties.