Latest Tax Brackets in Mexico 2023. Resident individuals are subject to Mexican income tax on their worldwide income, regardless of their nationality. Non-residents, including Mexican citizens who can prove residence for tax purposes in a foreign country, are taxed only on their Mexican-source income.
The Federal Tax Code provides that a person is a resident for Mexican tax purposes when that person establishes a home in Mexico. If the individual has a home in another country, then the individual is a resident of the country where the individual’s center of vital interests is located.
Under Mexican domestic tax law, a person’s center of vital interests is considered located in Mexico if either (i) more than 50% of the person’s income comes from Mexican sources in a calendar year or (ii) Mexico is the primary place of the person’s professional activities.
In this article, you will get what tax brackets really mean, the latest tax brackets in Mexico, and a whole lots of important updates on the Mexican tax brackets.
What is a tax bracket in Mexico?
A tax bracket refers to the range of incomes subject to a certain income tax rate. Tax brackets result in a progressive tax system, in which taxation progressively increases as an individual’s income grows. Low incomes fall into tax brackets with relatively low-income tax rates, while higher earnings fall into brackets with higher rates.
Tax Brackets in Mexico
Mexican resident taxpayers’ are subject to corporate income tax from worldwide sources, and foreign residents are taxed on the income attributed to their permanent establishments in Mexico. Foreign enterprises established in Mexico are subject to the same tax system as national enterprises, though they do benefit from certain exemptions. Although various states have started to offer competing tax incentives to attract foreign investors, the majority of taxes in Mexico are levied at the federal level.
The following tax rates are effective for resident individuals for the calendar year 2022:
|Taxable income (MXN)||Basic tax|
|Over||Not over||Tax on column 1 (MXN)||Tax on excess (%)|
If the employee is considered a non-resident for Mexican tax purposes, the tax rate applicable to compensation will vary from 15% to 30%. The first MXN 125,900 of employment income received in a 12-month floating period will be tax-exempt.
The following tax table is applicable to income tax with respect to income earned by non-residents for the calendar year 2022:
|Taxable income (MXN)||Tax rate(%)|
Non-residents are subject to withholding taxes (WHTs) on Mexican-source interest income at rates varying from 0% to 35%, depending on several factors. Non-residents are subject to Mexican tax on gains arising from sales of real property located in Mexico (including shares of foreign companies holding a significant amount of Mexican real property) as well as the sale of shares of Mexican companies.
Generally, when a capital gain is subject to tax, the non-resident investor can elect to pay either a flat rate of 25% of the gross proceeds or 35% of the net gain. Sales of shares in the Mexican stock exchange are subject to a flat 10% tax withholding on the profit from the said transaction.
Other types of Mexican-source income (including rents and royalties) are also subject to WHTs when paid to a non-resident. In the case of dividends and other corporate distributions from Mexican companies, since 2014, there is a 10% tax withholding on the dividends from corporate profits generated after 2013.
According to the Mexican Federal Tax Code, companies are considered Mexican residents if their principal center of administration or the effective place of management is located in Mexico.