Income subject to tax. The taxation of various types of income is described below.
Employment income. Taxable employment income includes salaries, wages, directors’ fees, bonuses, gratuities, allowances, certain fringe benefits, benefits in kind and statutory employee profitsharing distributions.
Education allowances provided by employers to their expatriate or local employees are taxable for income tax and social security purposes if the allowances are not generally provided to all the employees under the applicable rules for fringe benefits.
Nonresidents who receive salaries paid by resident employers or by employers with permanent establishments in Mexico are subject to withholding tax at source as described in Rates. Salary income and income for personal services paid by a nonresident individual or company are exempt from tax if the services are not related to the nonresident payer’s permanent establishment in Mexico (or the nonresident payer does not have a permanent establishment) and if the services are provided for fewer than 183 days (including Saturdays, Sundays, holidays and vacations). For purposes of this rule, the 183 days need not be consecutive in a 12-month period. If services are provided for more than 183 days, individual tax calculated using nonresident tax rates must be paid from the first day the individual begins to work in Mexico.
Directors’ fees. Directors’ fees received by residents of Mexico from Mexican or foreign resident companies are subject to income tax at the rates set forth in Rates. The paying companies may deduct these fees if certain requirements are met.
Self-employment and business income. A self-employed individual who earns income from business activities or professional services is subject to tax at the applicable rates established in the law and published by the tax authorities. The tax is calculated on the net income derived by the individual for each month corresponding to the period to which prepayment applies (see Section D). Self-employed individuals also must pay other taxes, such as value-added tax.
Business income related to services rendered through internet platforms is subject to an income tax withholding to be performed by the company, resident or nonresident, for Mexico tax purposes, that provided the platform to perform such services. The income categories and tax withholding rates comprised under this section are the following:
• Ground transportation passenger services and delivery of goods or services: 2.1%
• Accommodation services: 4%
• Sale of goods: 1%
These withholdings can be considered as definitive payments if some requirements are met.
Professional fees paid by a Mexican resident to a nonresident for services rendered in Mexico are subject to withholding tax at a rate of 25%. If the services are rendered only partially in Mexico, income tax is payable on the portion of the income related to the services rendered in Mexico.
Investment income. A company resident in Mexico that distributes dividends to its resident and nonresident shareholders is subject to a 30% corporate tax to the extent that such company has not already paid the tax on the underlying income. Dividends must be included in a resident’s taxable income. The corporate tax paid is credited against the resident’s final tax liability. Dividends paid by foreign resident entities to Mexican resident individuals are included in the individuals’ taxable income and taxed at the rates set forth in Rates
An additional 10% withholding tax applies to dividends. For dividends paid by Mexican companies, the tax withheld by the paying company is final. Accordingly, individuals are required to declare the dividend income in their annual tax return and cannot claim a credit for the 10% withholding tax, thereby incurring an incremental tax cost. For dividends paid by foreign companies, individual resident taxpayers must pay the 10% tax by filing a monthly tax return by the 17th day of the month following the dividend distribution. They are also required to declare the dividend income in their annual tax return and cannot claim a credit for the 10% tax paid, thereby incurring an incremental tax cost.
For 2024, interest on time deposits with Mexican banks and on publicly issued debentures is subject to a provisional 0.5% withholding tax on the capital invested that originated the interest. Interest derived from investments in other entities (other than publicly issued debentures) is subject to a 20% provisional withholding tax on the nominal interest. Gains derived from the sale of publicly issued debentures are also subject to this tax. Other interest income is included in taxable income and taxed at the rates set forth in Rates. Individuals include in taxable income the real interest received during the fiscal year; for interest derived from investments held abroad or loans granted to foreign residents, the real interest income is taxable on an accrual basis. Real interest equals the amount by which interest exceeds the inflationary adjustment effects of the tax year. For 2024, interest income received by nonresidents from Mexican banks is subject to a 4.9% withholding tax. Lower rates may apply under certain tax treaties. Real interest income derived from investment returns and/or the foreign-exchange gains generated on investments abroad are also considered taxable income in Mexico. Income tax paid abroad on these items may be credited against Mexican income tax provided that the requirements for claiming the credits are met.
Income received by nonresidents from the rental of real estate and personal property is subject to a final withholding tax at a rate of 25%, with no deductions allowed. For real estate rental income derived by residents, taxpayers are subject to tax on their rental income even if it is derived from real estate located in foreign jurisdictions.
In general, individuals who receive rental income may deduct the following expenses:
• Property taxes and local taxes paid
• Maintenance expenses
• Real interest paid on mortgage loans (restrictions apply)
• Salaries, professional fees and commissions paid
• Property insurance premiums
Nonresident taxpayers deriving capital gains from the disposal of shares or real estate may elect to pay tax on the gross amount at a rate of 25% or to be taxed at a rate of 35% on the net gain. An individual electing the second alternative must designate a legal representative who is a tax resident of Mexico.
Deductions
Personal deductions and tax credits. Resident individuals are granted the following personal deductions:
• Fees and other payments for medical services; professional services in psychology and nutrition provided by persons who have legally issued professional qualifications and who are registered by the competent educational authorities; dental services and hospitalization services, if these services are provided for the taxpayer and his or her dependents and if the fees and payments are paid by personal checks of the taxpayer; electronic transfers from the taxpayer’s Mexican bank account or by personal credit, debit or service cards
• Funeral expenses limited to an amount equal to the UMA (approximately MXN39,606)
• Certain donations to public works or utilities, charitable or welfare institutions, and promoters of the arts or culture, capped at 7% of the preceding year’s taxable income
• Real interest paid on mortgage loans obtained from Mexican financial institutions with respect to the principal residence, if the credit does not exceed 750,000 UDIs (approximately MXN5,986,202)
• Voluntary contributions made to an individual retirement account, limited to five times the Unit of Measure and Update (UMA; five times the UMA equals approximately MXN198,031) and not exceeding 10% of the taxpayer’s current year taxable income
• Insurance premiums for medical coverage paid to Mexican insurance institutions for the taxpayer and his or her dependents
• Payments for the school-bus transportation of dependent children if it is mandatory for all the students in the school and if it is paid by personal checks of the taxpayer, electronic transfers from the taxpayer’s Mexican bank account or by personal credit, debit or service cards
• School fees paid with checks or electronic transfers, except materials and registration fees, up to the following amounts:
— Preschool: MXN14,200
— Elementary school: MXN12,900
— Junior high school: MXN19,900
— Technician school: MXN17,100
— High school: MXN24,500
The total amount of personal tax deductions listed above (except the fifth bullet) is subject to a cap equal to five times the UMA or 15% of the taxpayer’s total income, whichever is lower.
Business expenses. Ordinary expenses, including salaries, fees, rent, depreciation, interest and other general items, may be deducted from the amount of gross business revenue to compute taxable net income, if business activities are carried out.
Taxpayers are encouraged to retain all digital invoices (CFDIs) related to these expenses because the tax authorities may require
the taxpayer to submit these receipts for review. Payments should be made by check, wire transfer, debit or credit card. The CFDIs must meet all requirements established under Mexican law, including, among others, they must contain the following:
• Name, business name, tax address and tax identification (RFC) of the issuer
• Invoice number and digital stamp
• Date and place of issue
• RFC and ZIP code of the taxpayer to whom the invoice is being issued as well as the use of the CFDI (such as for school expenses, medical expenses, purchase of computer equipment, donations and general expenses)
• Description and amounts of the services and goods acquired
• Form of payment (check, wire transfer, debit or credit card)
In general, only personal deductions incurred in Mexico are deductible. Expenses that were reimbursed to the taxpayer are not deductible.
Employment subsidy. The employment subsidy is calculated on a monthly basis. It is a tax credit that is subtracted from the monthly tax due. No employment subsidy applies when calculating tax in the annual tax return. The following table provides the resident individual monthly employment subsidy for 2024.
Residents. For 2024, the maximum income tax rate for a resident individual is 35%. The following are the monthly income tax rates applicable in 2024.
Resident employees of foreign resident companies who work in Mexico must make monthly estimated payments on account of their annual tax if their companies do not have permanent establishments in Mexico or if their compensation is not reflected on a Mexican company’s payroll. For such purpose, they must open a Mexican bank account and make their advance income tax payments through electronic transfers via the Internet.
Married persons are taxed separately, not jointly, on all types of income.
E. Double tax relief and tax treaties
An individual resident in Mexico with foreign-source income may take a credit for foreign tax paid in the source country to the extent that the foreign tax paid does not exceed the individual’s Mexican tax liability on the foreign-source income and if certain requirements are met.
Mexico has entered into double tax treaties with the following jurisdictions.
Argentina Greece Panama
Aruba (a)
Guernsey (a) Peru
Australia Hong Kong SAR Philippines
Austria Hungary Poland
Bahamas (a) Iceland Portugal
Bahrain India Qatar
Barbados Indonesia Romania
Belgium Ireland (b) Russian
Belize (a)
Bermuda (a)
Isle of Man (a) Federation
Israel
St. Lucia (a)
Brazil Italy Samoa (a)
Canada Jamaica Saudi Arabia
Cayman Islands (a) Japan Singapore
Chile Jersey (a) Slovak Republic
China Mainland Korea (South) South Africa
Colombia Kuwait Spain
Cook Islands (a) Latvia Sweden
Costa Rica
Liechtenstein (a) Switzerland
Czech Republic Lithuania Türkiye
Denmark Luxembourg Ukraine
Ecuador Malta United Arab
Estonia Netherlands Emirates
Finland Netherlands Antilles (a) United Kingdom
France
New Zealand United States
Germany Norway Uruguay
Gibraltar
(a) This is a treaty for information exchange. (b) This treaty is in a renegotiation process.
In addition, Mexico has signed a double tax treaty with Venezuela, but this treaty is not yet in force.
Mexico is currently negotiating double tax treaties with various jurisdictions, including, among others, Egypt, Guatemala, Iran, Lebanon, Malaysia, the Marshall Islands, Monaco, Morocco, Nicaragua, Oman, Pakistan, Slovenia, Thailand, Vanuatu, Venezuela and Vietnam.
F. Entry into Mexico
Foreign nationals entering Mexico are classified under the following immigration categories:
• Visitor
• Temporary resident
• Permanent resident
These categories are discussed below.
Visitor. The visitor category has two subcategories, which are visitor without authorization to perform remunerated activities in Mexico and visitor with authorization to perform activities remunerated in Mexico.
Visitor without authorization to perform activities remunerated in Mexico. The immigration category for the visitor without authorization to perform activities remunerated in Mexico category applies to foreigners who intend to stay in Mexico up to 180 days but are not entitled to receive remuneration in Mexico. Individuals of certain nationalities are required to apply for a visa of this immigration category at a Mexican consulate or embassy before traveling to Mexico.
Individuals of nationalities without restrictions may enter Mexico under this category by downloading an electronic entry form on arrival.
Individuals of nationalities with restrictions may also enter Mexico if they are holders of any of the following:
• A proof of permanent residence in Canada, Japan, the United Kingdom, the United States, a country that is part of the Schengen area or a country that is a member of the Pacific Alliance (Chile, Colombia and Peru)
• Valid visa issued by Canada, Japan, the United Kingdom, the United States or a country that is part of the Schengen Area
• A valid Asia-Pacific Economic Cooperation Business Travel Card approved by Mexico
Tourists or businesspersons are considered visitors without permission to perform activities remunerated in Mexico.
Certain nationalities have recently been under heavy scrutiny by immigration officials at the points of entry. These travelers are advised to always bring a departure flight reservation, hotel reservation and proper invitation letter. It is not uncommon to have the requested stay limited by the officials to a shorter period than needed.
Visitor with authorization to perform activities remunerated in Mexico. A visa for a visitor with authorization to perform activities remunerated in Mexico allows foreigners to stay in Mexico up to 180 days, with permission to be remunerated in Mexico for activities carried out in the country.
The application for this type of visa must be submitted through the National Immigration Institute (Instituto Nacional de Migración, or INM) in Mexico.
List of restricted nationalities. Nationals of the following jurisdictions must obtain a visa before traveling to Mexico.
re-enters Mexico within 55 days after the immigration document’s expiration date and submits the renewal request within five days after the date of entry into the country. This grace period is only granted for renewal requests, not for change of immigration status applications.
Foreigners who are in Mexico with an expired immigration status must file a request for reinstatement of their status within 60 calendar days of the date of expiration of the immigration document. The foreigner must appear before the INM to justify the reason for his or her irregular immigration status, pay an administrative fine and remain in Mexico until his or her immigration status is reinstated.
If these time frames for immigration status renewals and reinstatements are not observed and if the foreigner does not have any ties to a Mexican citizen or a temporary or permanent resident, the INM may deny the renewal or reinstatement request and order the foreigner (as well as the accompanying family, assuming they are also out of status) to leave Mexico. After the issuance of this order, the foreigner may be required to wait a minimum of six months before he or she can reapply to enter the country.
Recently, the immigration authority has made it mandatory for extensions and other applications to be filed in person and enabled an online appointment system. Applicants must make sure that their advisors keep them up to date with these developments to avoid falling out of compliance at any given time.
Obligations of employers and employees. Individuals or companies that intend to hire or have foreigners under their responsibility must request a mandatory employer registration from the immigration authority.
All registered employers are required to formally notify the INM regarding changes in, among other items, their articles of incorporation, address and legal representative. Any reportable change must be disclosed within 30 calendar days. In addition, companies are required to annually update their employer registration file at the INM after filing their annual Mexican corporate income tax return.
Temporary and permanent residents must notify the INM of any changes regarding residence, marital status, nationality and employer. Notifications by residents must be filed with the INM within 90 calendar days following such a change; otherwise, the resident may be subject to monetary fines.