Mexico Approves Tax Reform Package for 2014 Update from Nair & Co. International Tax Team (Bristol, UK) - The Mexican Chamber of Deputies recently approved a tax reform package enacting a new Income Tax law and changing various important provisions, outlined below. These changes will be applicable starting 1 January 2014, reports Nair & Co.’s International Tax team. Corporate income tax:
The new corporate tax rate remains at 30%.
A new withholding tax of 10% on dividends paid by domestic companies to resident individuals and nonresidents; the new rate will apply to 2014 profits. The introduction of an optional group taxation system allowing for a tax deferral of tax for a three year period. Up to 47% of exempt compensation given to employees may be allowed as deduction for employers; however, under certain conditions the limit would be 53%.
Corporations and individuals may obtain tax audit reports in order to carry out business activities in case their taxable gross income is more than MXN100 million, assets are in excess of MXN79 million and there is a minimum of 300 employees, in the previous year.
Individual income tax:
Individual deductions are allowed for the lower of up to 4 annual minimum salaries or 10% of net income. The maximum tax rate for individuals has increased to 35% from the previous 30%.
The process for calculating foreign tax credit and employees’ profit sharing will be changed. The maquila regime will be applicable for entities that earn income only from maquila activities, after fulfilling certain conditions.
Accelerated tax depreciation for investments. The existing group taxation system. Transitory provisions including the process to pay the tax postponed during consolidation period. Expenditures including interest, technical assistance expenditure and royalty payments to non-resident entities will not be allowed as a tax deduction under certain circumstances.
The business flat rate tax and the tax on cash deposits.
The new dividend withholding tax provisions and tax audit norms may affect many companies operating in Mexico. An increase in the highest tax slab for individuals could affect payroll withholding calculations. Mexican companies are advised to conduct a detailed analysis of the 2014 Tax Reform Package to assess actual impact. For more information about doing business overseas or to know more about our International Human Resource Services please contact us. Subscribe to regular global tax compliance alerts from Nair & Co. International Business Guide (IBG) is our online platform for companies wishing to optimize their multinational operations and would like to have specific business information for doing business in a particular country - Click Here. Get the latest news releases and updates on international tax, HR, Finance, compliance and other legal news at Nair & Co. Industry Alerts. About Nair & Co. Nair & Co., the leader in international business expansion services, provides accounting, HR, legal, tax and compliance services for the set up and management of your international operations. Our model of a single-pointof-contact, supported by internal teams of experienced advisors, helps clients expand business and manage risk so they can focus on their core business and sustain growth with minimal risk, stress and cost. We support nearly 250 clients in over 70 countries. Nair & Co. is headquartered in Bristol, UK, has 450 employees and offices in China, India, Japan, Singapore, and the US. Learn more at www.nair-co.com Media Contacts For media enquiries or to learn to more about Nair & Co., please email us at firstname.lastname@example.org or call Yvonne Smith at +1.408.501.8867