Tax Treaty with the U.S.
Mexico is one of the few jurisdictions that has a tax treaty with the U.S. in the Latin American region. The relevant documents are the following:
Subject to the Limitations on Benefits Clause (LOB), the tax treaty between Mexico and the U.S. provides for multiple tax benefits, specifically as for the determination of a PE, reduced withholding tax rates, and exemption of certain types of income such as business profits.
Currency. Mexican peso (MXN)
Common Legal Entities. Corporation (SA), limited liability company (SRL) and branches.
Tax Authorities. Servicio de Administración Tributaria (SAT or Tax Administration Service)
Tax Treaties. Mexico is a party 59 tax treaties, and is a signatory to the OECD’s MLI.
Corporate Income Tax Rate. 30%
Individual Tax Rate. Up to 35%
Corporate Capital Gains Tax Rate. Mexico does not provide for special tax treatment with respect to capital gains.
Individual Capital Gains Tax Rate. 10% where applicable.
Residence. An individual is deemed a
tax resident if she/he maintains a permanent home in Mexico. Mexican nationals are deemed tax residents, subject to the permanent home and center-of-vital-interests test.
Withholding Tax.
Dividends. 10%
Interest. 35%, generally.
Royalties. 35%
Transfer Pricing. Mexico employs
transfer pricing rules that largely adhere to OECD guidelines, generally utilizing the comparable uncontrolled price (CUP) method or the cost plus and resale price methods
CFC Rules. Yes, Mexico provides for a controlled foreign company (CFC) regime for certain “controlled” entities with significant passive income that is subject to low rates relative to Mexico’s statutory rate.
Inheritance/estate tax. No.
Taxpayers with interests in assets located in Mexico or income sourced in Mexico may have important reporting obligations, including the following forms:
Other forms and reporting obligations may apply.
