Social security provides medical attention for employees and their dependents. The social-security contributions are incurred by both the employer and the employee (through withholding) and remitted to the social-security authorities every month.
If the particular company is making the payments, it is very probable that it will be mandatory to submit a tax report for social-security purposes.
- Monthly advanced payments (income or asset tax and value-added tax)
- Annual tax return (income and asset tax)
- Transfer pricing regulations (Safe Harbor computations)
- Compliance letter
- Payroll withholdings
- Informative returns
- Social security and housing-fund contributions
A minimum tax on assets to supplement the federal income tax is payable by corporations, unincorporated businesses and branches, as well as by other entities or individuals carrying out business activities or whose assets are used for a business activity by persons subject to the tax.
Taxpayers shall determine the tax for fiscal years by applying the rate of 1.8 percent to the value of their assets in the fiscal year.
Value-Added Tax (VAT)
Value-added tax represents a one-time charge tax, payable by the ultimate consumer of all types of products and services. Exports are zero rated, and consequently VAT is not payable on exports, including exports of In-Bond processing companies.
Even though the exporter does not collect VAT on export sales, it has a right to recover VAT charges on its purchases of goods and services by means of a refund.
As a result of the presidential decree on October 30, 2003, maquiladora companies will receive a partial exemption in income tax. Such exemption will be calculated based on the difference between the percentages established for the Safe Harbor option:
- 6.9 percent on assets
- 6.5 percent on operating costs and expenses
- 3 percent for both cases, as long as the transfer pricing rules are fulfilled
For purposes of computing the average of assets, taxpayers are allowed to exclude the inventories used in their maquiladora operation.
Note: this incentive reduces the income tax to be paid and not the taxable income for profit-sharing purposes.
Taxable entities include different types of corporations, such as limited-liability companies, Mexican partnerships and organizations. Under certain circumstances, nonresident corporations may be considered to have a permanent establishment in México for income-tax purposes, including branches of foreign corporations duly registered to operate in México.
Foreign residents will not have permanent establishment for their legal and economic relationship with maquiladoras if they are residents of a country that has in place a tax treaty with México and if the maquiladora complies with the following options:
- Advanced price agreement
- Safe Harbor
The principal taxes payable by commercial and industrial enterprises operating in México, and, in certain cases, by foreign companies and individuals, are those levied by the federal government. State and municipal governments have more-limited tax powers and also receive allocations of some federal taxes collected within the border. The principal taxes are as follows:
- Income tax
- Value-added tax
- Asset tax
- Payroll taxes, mainly Social Security
- On real property
- On salaries
Individual and corporate residents of México are subject to México taxation on their worldwide income. Tax credit up to the amount of the Mexican income tax is allowed for foreign income taxes paid in foreign-source income, and the law is designed to avoid double taxation of international transactions.