Income Tax

The basic tax for companies in Mexico is Income Tax [in Spanish: el ISR]. In accordance with current Mexican legislation, Income Tax for legal entities is from 30% with a maximum progressive rate of 35% for individuals. 

Additional Taxable Income on Dividends 

From 2014, a 10% tax that is additional to Income Tax will be incurred on dividends that legal entity residents in Mexico pay to individuals who are residents in the country, or on those that are paid to residents who are living abroad. 

This will only apply to those dividends that generate profits from 2014 on. However, to enjoy the benefit of not incurring the 10% tax that is additional to Income Tax on paid dividends for the years prior to 2014, it is indispensable to keep track of your “net earnings” [in Spanish: “Cuenta de Utilidad Fiscal Neta” (CUFIN)], that were incurred before 2014; and it must be done in a suitable and allocated manner.  

The following example is shown for the purposes of illustrating the additional 10% tax:

Employee Profit Sharing Plan (EPSP) 

In accordance with the Mexican Federal Labor Law [in Spanish: la Ley Federal del Trabajo], it is the obligation of a company to distribute to its workers by May 31st of the immediate following year 10% of the net earnings that were incurred in the year.This distribution is known as “An Employee Profit Sharing Plan” (EPSP) [in Spanish: “Participación de los Trabajadores en las Utilidades” (PTU)]. The calculation for assessing the EPSP is regulated by the Income Tax Act [in Spanish: la Ley del Impuesto Sobre la Renta].

The following example is shown for the purposes of illustrating how the EPSP is calculated:

If you wish to receive more information, please contact us. We will be pleased to help you.