What are the proper know-hows of tax registry in Mexico for foreign residents?
First, one must identify if they are eligible for a tax registry in Mexico. Individuals that have established their permanent home in Mexico are considered as Mexican residents. For expats, their status is defined based on the criteria on where their “center of vital interests” is located. This means that 50% of the individual’s income is earned in Mexico, and their main professional activities is done in the country. The Mexican tax authorities (SAT) consider an individual as a Mexican resident if their “center of vital interests” lies in Mexico. It is even often said that living and working for an entire year in Mexico automatically makes an individual a tax resident.
Any income that an individual earns from working in the country is liable for a tax registry in Mexico. Mexican residents that are working for a foreign company still need to pay taxes in Mexico but are liable to receive a tax credit, or a reimbursement from SAT in order to avoid double taxation. Taxes such as Social Security, estate, and inheritance are paid by Mexican employers in deduction to their payroll, and are not required to be paid by individuals not receiving any income.
Tax registry in Mexico starts on the 1st of January and ends on the 31st of December. Tax returns must be filed on or before the 30th of April the following year since no extensions are possible. Tax declaration can be accomplished through the SAT user-friendly website, and tax returns have to be filed at the Servicio de Administracion Tributaria or SAT.
Income Tax Rates
In addition, the tax registry in Mexico has released the income tax rates applicable as of the year 2017:
|Earnings in Pesos (Mexican dollar)||Rate applicable to Income Level (%)|
|0 – 125, 900.00||0% (Exempted)|
|125, 900.00 – 1,000,000.00||15%|
|1,000,001.00 and above||30%|
A 16% Impuesto al Valor Agregado or IVA will also be paid by the taxpayer, which is the equivalent of the value-added tax. This is the rate given as of last year.
Tax registry in Mexico is often seen by foreign residents as a hurdle they must cross every year. Incorrect filing of an annual tax registry are usually given a fine by the SAT, and the ever-changing tax regulation and rates usually cause confusion for them. That is why one must have all the know-hows with regards to the tax registry in Mexico, in order to avoid troublesome situations, therefore saving time, money, and effort.