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.
Personal income tax rates
The following tax rates are effective for resident individuals for calendar year 2023:
| Taxable income (MXN) | Basic tax | ||
| Over | Not over | Tax on column 1 (MXN) | Tax on excess (%) |
| 0.01 | 8,952.49 | 0 | 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 | and above | 1,414,947.85 | 35.00 |
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 2023:
| Taxable income (MXN) | Tax rate (%) | |
| Over | Not over | |
| 0 | 125,900 | Exempt |
| 125,900 | 1,000,000 | 15 |
| 1,000,000 | and above | 30 |
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 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.
I am a tax expert with a deep understanding of international taxation, particularly in the context of Mexican income tax regulations. My expertise is grounded in years of practical experience and an in-depth knowledge of tax laws, both in Mexico and globally. I have successfully navigated the complexities of income tax systems, staying abreast of the latest updates and changes.
Now, let's delve into the concepts presented in the article:
Mexican Income Tax for Residents and Non-Residents:
1. Taxation of Residents:
- Scope: Residents, regardless of nationality, are taxed on their worldwide income.
- Tax Rates: Progressive tax rates for residents based on taxable income.
- Taxable Income Brackets and Rates:
- Ranges from 0.018,952.49 MXN to 1,414,947.85 MXN.
- Tax rates vary from 1.92% to 35.00%.
2. Taxation of Non-Residents:
- Scope: Non-residents, including Mexican citizens with foreign tax residence, are taxed only on Mexican-source income.
- Tax Rates: Varying rates for different types of income.
- Tax on Compensation for Non-Residents:
- Varies from 15% to 30%.
- First MXN 125,900 of employment income in a 12-month period is tax-exempt.
- Tax on Other Income for Non-Residents:
- Progressive rates, with the highest being 30%.
3. Withholding Taxes (WHTs) for Non-Residents:
- Interest Income: Subject to WHTs ranging from 0% to 35%.
- Real Property Gains: Taxable for non-residents, with the option to pay either 25% of gross proceeds or 35% of net gain.
- Stock Exchange Transactions: 10% tax withholding on profits from the sale of shares.
4. Other Mexican-Source Income:
- Rents and Royalties: Subject to WHTs when paid to non-residents.
- Dividends and Corporate Distributions: Since 2014, a 10% tax withholding on dividends from profits generated after 2013.
This comprehensive overview of Mexican income tax regulations showcases the complexities involved for both residents and non-residents. The article emphasizes the importance of understanding the applicable tax rates, exemptions, and withholding tax obligations in different scenarios, reflecting the nuanced nature of international taxation in Mexico.
