TKEG Expat™ (Test) Mexico Corporate Tax Guide

Mexico imposes a corporate income tax (CIT) rate of 30%. Companies in Mexico are expected to file their CIT returns by March 31 of each year. The final payment for CIT is due on the same date. For businesses, CIT payments are not only made annually, but estimated payments must also be submitted by the 17th of each month to ensure compliance throughout the fiscal year. This helps to maintain a steady tax flow and avoid significant lump-sum payments at year-end, spreading the burden over time.

Personal Income Tax (PIT) in Mexico is progressive, with rates for residents going up to 35%. For non-residents, the rates vary depending on the type of income, but for salaries, the progressive rates reach up to 30%. All residents are required to file their PIT returns by April 30, with the final payment also due on this date. Similar to corporate income tax, estimated PIT payments for the year must be made by the 17th of the following month in which the income is received. This structured approach helps individuals and non-residents in Mexico manage their tax responsibilities systematically.

In Mexico, the withholding tax (WHT) rates vary based on the type of income and residency status. For residents, dividends are subject to a 10% WHT, interest to 0.90%, and royalties are not taxed under WHT. For non-residents, dividends are also taxed at 10%, while interest ranges from 4.9% to 35% depending on the amount, and royalties attract WHT rates between 5% and 35%. These variations ensure Mexico taxes various forms of income differently based on residency and income type, providing a tailored approach to tax obligations.

Capital Gains Tax (CGT) for corporate entities in Mexico is levied at 30%, treated as part of their regular taxable income. For non-residents, capital gains on gross proceeds are taxed at 25%, or 35% on net gains. This ensures that non-resident entities are taxed fairly, based on their actual profits or gains from business activities within Mexico. The structured CGT rate supports the Mexican government’s aim to generate revenue from both resident and non-resident investors who benefit from the country’s economic environment.

Mexico's standard value-added tax (VAT) rate is 16%, applicable to the sale of goods and services, including lease payments and imports. Certain goods and services, such as residential construction, education, and medical services, are exempt from VAT. Additionally, some industries, such as Maquiladoras (factories in Mexico operated by foreign companies), can receive VAT relief. The VAT law also includes a 0% rate for exported goods and services, as well as certain basic foodstuffs and medicines. Businesses in Mexico can also claim input VAT credits on purchases or expenses related to taxable activities. This allows for better cash flow management for companies engaged in taxable activities, making VAT a crucial part of Mexico’s tax system.