Many foreigners living in Mexico are unsure whether they are liable for paying income taxes here. Below, we have outlined some of the important things to consider when doing business in Mexico.
Who is Liable for Income Tax in Mexico?
- Foreigners employed in Mexico.
- Mexican residents (temporary or permanent) who work in Mexico or online, regardless of where the income is deposited.
- Mexican residents living abroad, with revenue from sources in Mexico, although they do not have a permanent establishment here.
- Foreigners with income from a rental unit in Mexico; even if the funds are deposited in another country, it is considered revenue earned in Mexico.
IncomeTax (ISR): Impuesto Sobre la Renta
Income tax is known as ISR (ImpuestoSobre la Renta) in Mexico and it is calculated differently whether you are an individual or a legal entity (corporation).
Individuals
The ISR rates for individuals were updated for 2023 to account for inflation as of November 2022.
Pursuant to Article 152 of the Income Tax Law, the rates applied in the calculation of the income tax paid by individuals must be updated according to the inflationary increase.
Therefore, when the inflation exceeds 10% since the last time the rates were updated, as in this case. It is worth mentioning that the last time the rates were updated was in 2021, based on inflation up to December 2020.
Individual income tax varies between 1.92% – 35%, depending on your income and your tax regime. It is very important that you have a trusted and experienced accountant who can determine which tax regime is the best option for you. Additionally, they will guide you on which expenses are deductible and ensuring you are requesting invoices (facturas) correctly from your suppliers to ensure they are deductible.
Typically, your tax payments are submitted monthly before the 17th of each month for income earned in the previous month. All individuals are obligated to file the annual declaration by April 30th.
| Lower limit | Upper limit | Fixed Fee | % to be applied to the excess of the lower limit |
| $ | $ | $ | % |
| 0.01 | 8,952.49 | 0.00 | 1.92 |
| 8,952.50 | 75,984.55 | 171.88 | 6.40 |
| 75,984.56 | 133,536.07 | 4,461.94 | 10.88 |
| 133,536.08 | 155,229.80 | 10,723.55 | 16.00 |
| 155,229.81 | 185,852.57 | 14,194.54 | 17.92 |
| 185,852.58 | 374,837.88 | 19,682.13 | 21.36 |
| 374,837.89 | 590,795.99 | 60,049.40 | 23.52 |
| 590,796.00 | 1,127,926.84 | 110,842.74 | 30.00 |
| 1,127,926.85 | 1,503,902.46 | 271,981.99 | 32.00 |
| 1,503,902.47 | 4,511,707.37 | 392,294.17 | 34.00 |
| 4,511,707.38 | hereinafter | 1,414,947.85 | 35.00 |
*Information obtained on December 27 in the Official Gazette of the Federation (DOF) Annex 8 of the Miscellaneous Tax Resolution for 2023.
Legal Entity
Corporations pay ISR monthly at a fixed 30% tax on taxable income, depending on the profits earned in the previous year, with an annual pay adjustment. This amount will be determined by calculating the income and deductions throughout the year. This tax is reported and paid monthly. Within the first three months of the following year, income tax declarations are filed in order to report revenue and expenditures throughout the previous year.
What’s Next?
Contact our professional team of accountants at Mextax to ensure you are correctly filing your taxes and declaring all applicable expenses to pay the lowest rate possible.
