taxation if your are a resident and other issues

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Permanent Residentís Right to Work in Mexico

Post by dean on Wed Aug 14, 2013 8:24 am



http://yucalandia.com/2013/08/13/permanent-residents-right-to-work-in-mexico/

Fortunately, this is a tempest in their teapot: The May 2011 INM Law clearly stated that Residente Permanente card holders are given full rights to work. As a real-world example of how the Law works, I got my Residente Permanente card in May, was hired by UADY in July, and just received my first paycheck this August (Yaay!). And yes, the work that I do can be done by other Mexicans.
Further, as reported here before: Having a Residente Permanente card does NOT mean you are completely done with INM: INM does require R.P. card holders to report any changes in their Mexican address, changes in their Mexican work/earning status, or changes in Mexican employer.

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taxation if your are a resident and other issues

Post by dean on Thu Jun 20, 2013 10:13 pm

http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/taxation-international-executives/mexico/Pages/income-tax.aspx

All income tax information is summarized by KPMG CŠrdenas Dosal, S.C., the Mexican member firm of KPMG International, based on the Mexican Tax Code, article 9 and the Mexican Tax Law, articles 6; Title IV articles 106, 109, and Chapter I, III, IV, VI, VIII, IX, XI; and Title VI.


Tax returns and compliance
When are tax returns due? That is, what is the tax return due date?

30 April, with no extensions allowed.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Mexico?

Residents

Individuals should file a Mexican annual income tax return by 30 April of the following year on their worldwide income on their worldwide income, except in the following cases.


  • When they receive only exempted income or income on which the income tax withheld or paid is considered final.

  • When they only receive wages and salaries amounting less than MXP400,000, provided they did not work for two or more employers simultaneously during the year and were employed at the end of the year. However, see the following condition. This exception does not apply when the employee receives salary payments derived from foreign sources or from entities with no withholding obligation.

  • Individuals obtaining a combined annual income of salary and interest income not exceeding MXP400,000, if and when the actual interest (interest versus inflation) does not exceed MXP100,000, are not obligated to file an annual tax return provided that the income tax on the actual interest has been withheld to them. In this case, the tax withheld is considered final. It is important to mention that per a Decree published on March 30, 2012 individuals that are obligated to include interest income in their annual return may choose not to include them provided they consider the income tax withheld by the person paying the interest as a final payment.



Those individuals who obtained total income amounting to MXP500,000 or more during the tax year, including exempted income and income that paid final tax, are obliged to report in their annual tax return the travel expenses reimbursed by the employer, income on sale of principal residence (when the exemption applies), income from inheritances and legacies, as well as income received for prizes. Besides, all prizes, loans, and donations received in the tax year, that in aggregate or individually amount to more than MXP600,000 in the tax year should also be reported.

Failure to comply with the earlier mentioned reporting requirements may result in the income being considered as taxable, even if originally such income was exempt or non-taxable.

The income tax is determined by applying a graduated scale with a maximum marginal tax rate of 30 percent for tax year 2013. This tax rate is reached with a monthly income of MXP32,736.84 and with an annual income of MXP392,841.97. Estimated tax payments and withholdings are credited to offset the final annual tax liability. The deadline to make the tax payments or remit the withholdings to the Mexican tax authorities is the 17th of the following month.

Due to a tax reform approved by the Mexican Congress in 2009, the tax rate increased from 29 percent to 30 percent. This marginal rate will be applicable for the taxable years 2010, 2011, and 2012. For 2013, it was supposed to be 29 percent and returning to 28 percent in 2014. However, the Mexican Congress published that for 2013 the tax rate remains at 30 percent.

Non-residents

Individuals considered non-residents will be taxed on their Mexican-sourced income only and will not be subject to file a Mexican annual income tax return, as monthly tax payments/withholdings will be considered as final or definitive.

Non-residents are allowed to have an exempt income on the first MXP125,900 wages earned, an income tax rate of 15 percent when income exceeds MXP125,900 and 30 percent on the income that exceeds MXP1,000,000 within a 12-month period. Individuals should accumulate the income received every month to determine the tax rate to be used to calculate the corresponding income taxes.

For individuals considered as non-residents, the Mexican company will be required to withhold the corresponding taxes when their salaries are paid from the Mexican company or from abroad but the cost of the compensation is charged back to the Mexican company. When the cost of the compensation is not charged back to the Mexican company, the individuals will be required to file individual monthly income tax returns.

Additionally, the Mexican tax law establishes additional options to pay the non-resident income tax as follows:


  • the foreign employer withholds and remits the Mexican tax to the tax authorities (it is important to mention that this would require the foreign entity to be formally registered in Mexico as a withholding agent)

  • the Mexican company in which the services of the individual are performed could act as the collecting agent of the taxes and be responsible of remitting the non-resident income tax payments for the assignees or

  • the individuals could name a representative in Mexico through a power of attorney. The representative would be required to file the non-resident monthly income tax payments on their behalf.



Finally, it is important to point out that when compensation is paid from abroad, the cost of the compensation is not charged back to any Mexican entity and the individuals are less than 183 days in Mexico (consecutive or not) in any 12-month period, the individuals will be exempt totally for Mexican income taxes.

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Tax rates
What are the current income tax rates for residents and non-residents in Mexico?

Residents

Employers must make monthly income tax withholdings on compensation paid to their employees. Wage withholding is levied on a progressive scale as follows.

Income tax table for 2013

Taxable income bracketFixed quoteTax rate on the excess over the inferior limit
Inferior limit (MXP)Upper limit (MXP)MXPPercent
0.01496.070.001.92
496.084,210.419.526.40
4,210.427,399.42247.2310.88
7,399.438,601.5594.2416.00
8,601.5110,298.35786.5517.92
10,298.3620,770.291,090.6221.36
20,770.332,736.833,327.4223.52
32,736.84Over6,141.9530.00

In the case of split payroll arrangements, the portion of the compensation received directly from abroad is subject to monthly personal income tax payments. That is, the individual is the one obligated to file monthly tax returns. It is important to mention that when the cost of the compensation paid from abroad is charged back to a Mexican entity, as salaries paid on behalf of the Mexican entity, such Mexican entity is obligated to withhold and remit Mexican income taxes.

Monthly tax payments are due on or before the 17th day of the month following in which the compensation was received, using the monthly graduated rate scales. In case the individual is obligated to file monthly personal returns, additional days are granted depending on the individualís taxpayer ID number.

An employment subsidy may be applied against monthly withholdings and the annual tax liability. Employees with a monthly salary income more than MXP7,382.34 are not allowed to receive such subsidy.

Non-residents

Non-residents are only taxed on Mexican-sourced income. Mexican tax legislation establishes that income derived from an employment relationship should be considered as Mexican-sourced income when the associated personal services are rendered in Mexico.

Mexican income taxes for non-residents are calculated as follows.

Annual compensation (MXP)Annual compensation (MXP)Income tax rate (Percent)
0125,9000
125,9011,000,00015
1,000,000Over30

The tax should be paid within 15 days following the receipt of the income, unless a Mexican entity is obligated to withhold the tax or one of the earlier mentioned options to remit the tax is used, in which the due date will be the 17th day of the month following in which the compensation was received.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Mexico?

According to the Mexican Tax Code, an individual should be considered resident for Mexican tax purposes if he/she establishes his/her home in Mexico. In case the individual also has a home in another country, the individual will be tax resident in Mexico if his/her center of vital interests is in Mexico. It is considered that the individual has his/her center of vital interests in Mexico in either of the following cases, among others.


  • When more than 50 percent of the individualís total income received during the calendar year is derived from Mexican sources.

  • When the individualís main center of professional activities is located in Mexico.



On the other hand, the Mexican Tax Code states that in the absence of proof of the contrary, individuals of Mexican nationality are presumed to be residents of Mexico.

Additionally, individuals of Mexican nationality should retain their status as tax residents of Mexico when proving their tax residency in a country with a preferential tax regime for the year in which the notice of termination of tax residence is filed and for the following three years. It is important to mention that this provision is not applicable in those instances where Mexico has executed an unlimited exchange of information agreement with such preferential tax regime country.


Last edited by dean on Wed Jun 18, 2014 2:59 pm; edited 2 times in total

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