Corporate Tax Filing in Mexico: Federal and Local

Corporate tax filing in Mexico is done at the national and regional levels, so businesses must deal with different types of tax compliance based on where they are operating. 

If you are considering expanding into the North American country and will be seeking accounting advice or legal counsel in Mexico to support you, it is worth getting to grips with the corporate tax regime.

Tax Filing in Mexico: federal taxes

Tax filing in Mexico is done at different levels
Tax filing in Mexico depends on location

Mexico is a federal republic composed of 31 states and the Federal District of Mexico City, the country’s capital. So while federal taxes are imposed on all entities, corporate tax filing in Mexico will vary according to the state where your business is established. 

Note that taxes at the national level are managed by the Tax Administration Service (SAT). This public entity is in charge of issuing the tax ID number that is required for any entity operating within the country. The process to request and obtain a tax ID number is done virtually. 

Some of Mexico’s federal taxes include: 

Income tax: Income tax in Mexico is charged on the income accrued during the year, less the expenses incurred in the generation of said income. In general, the income tax rate for companies is 30 percent and it must be declared every year. 

Tax on dividends: Dividend tax in Mexico is charged at a general rate of 10 percent. This tax is paid through withholdings made by the distributing entity.

Value-added tax (VAT): VAT in Mexico is levied on the provision of services or the sale of goods in Mexican territory at a rate of 16 percent. Special rates or even exceptions may apply to some product categories.

Tax on special products and services: Products such as fuel, tobacco, and sugary drinks, among others, are subject to a special tax at a different rate for each product.

Note that tax depuration in Mexico can be quite complex, so it is recommended to seek expert advice to remain in full compliance with tax authorities.

Tax Filing in Mexico: local taxes

Property in Mexico is taxed at the municipal level
Property is taxed at the municipal level

For corporate tax filing in Mexico, state administrations handle the following taxes:

  • Motor vehicle tax
  • Hospitality industry tax
  • Payroll tax
  • Tax on concerts and public events
  • Tax on lotteries, casinos, and games 

Meanwhile, municipalities in Mexico levy the following taxes:

  • Tax on real estate
  • Tax on real estate sales
  • Public roads tax
  • Public street lighting tax

Rates and particular conditions may vary according to the state or municipality where you do business, so you will need to assess each particular situation.

International treaties

Mexico has standing treaties to avoid double taxation with more than 50 countries, including the United States and most other countries in The Americas, the European Union, and the Philippines. These agreements prevent taxes from being applied to commercial transactions that have been taxed in other jurisdictions, representing a financial incentive to foreign companies investing in Mexico. 

Get expert advice on corporate tax filing in Mexico  

Understanding corporate tax filing in Mexico can be challenging without the advice of an expert tax advisor. At Biz Latin Hub, our team of multilingual tax experts is ready to help grow your Mexico operation while keeping your tax burden low in accordance with local legal norms. 

Reach out to us now so we can start to help you improve your tax compliance in Mexico.

 Learn more about our team and expert authors and watch the following video to learn 10 important tips for doing business in Mexico.

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