Mexico: Taxation Of Individuals

Last Updated: 26 June 1996
An individual resident in Mexico is liable for personal income tax on his or her worldwide income. Nonresident individuals are taxed on all their Mexican-source income, generally by way of withholding taxes (see "WITHHOLDING TAXES" and, in the case of business activities, "TAXATION OF NON RESIDENT COMPANIES"). For tax purposes, a resident individual is a person who has established a home in Mexico, unless that person remains in another country for over 183 days within the calendar year and can prove that tax residence has been acquired in that other country. When an individual resident in Mexico changes his or her place of residence to another country during a calendar year, provisional tax payments are regarded as definitive and no annual return need be filed.

Personal Income Tax Rates

Business tax earnings are taxed at a fixed rate of 34%, and some special rates apply to income from prizes. In other cases, progressive rates apply. The table of progressive rates for the year is, in effect, compiled by adding together the twelve monthly wage withholding tax tables in force during the year. (These tables are adjusted semiannually to take into account the effects of inflation.) Table A shows wage withholding tax rates as of January 1996.

                         TABLE A

       MONTHLY INCOME                     TAX WITHHELD

Lower Limit     Upper Limit     Fixed Amount       Rate on Excess 
   (Ps$)           (Ps$)           (Ps$)          over Lower Limit(%)

     0.01          193.31           -                     3
   193.32        1,640.72           5.80                 10
 1,640.73        2,883.41         150.53                 17
 2,883.42        3,351.85         361.80                 25
 3,351.86        4,013.06         478.90                 32
 4,013.07        8,093.79         690.49                 33
 8,093.80       12,756.93       2,037.12                 34
12,756.94           -           3,622.59                 35

Treatment Of Families

Married couples may adopt the concept either of joint ownership of property or of separate ownership of property. For couples who adopt the concept of joint ownership of property, income from capital gains and capital investments, including interest and rents, is regarded as joint income, and each spouse must declare 50% of such income. Couples who adopt the concept of separate ownership of property must declare all income individually. Children who earn taxable income are regarded as taxpayers in their own right.

Taxable Income

To determine annual taxable income, individuals must determine the income earned in the calendar year for each income category prescribed by law, make the deductions authorized for each category, add together the net income from each category, and subtract authorized personal deductions from that sum. If the deductions for a given category of income exceed the income in that category, the difference may be subtracted from other categories of income, excluding income derived from independent personal services. As an exception, income from business activities is taxed separately from other types of income.

Personal income tax is levied on receipts in cash, kind, or credit. Gains on the sale of shares, buildings, land, and personal property are chargeable as taxable income when the transaction is carried out, whether the proceeds are received in cash or by way of credit. Salaries, professional fees, rent from real property, most types of interest, and dividends are generally taxable on the basis of the amount received.

Employment Income

All income derived from employment is subject to tax (apart from that described at "Exempt income" below), including income from profit sharing, remuneration paid to members of boards of directors, bonuses, gratuities, allowances, and some fringe benefits. If the rate of interest on a loan from an employer to an employee is less than the daily average interest rate on a ninety-day treasury certificate during the prior month, the resulting difference or rate is applied to the outstanding balance and is taxable as part of employment income. Employment income is subject to tax withholding at source. The amounts withheld may be credited against the taxpayer's final liability. No deductions are authorized for expenses incurred in earning employment income.

Income From Personal Services

Income from personal services consists of all income from the rendering of independent personal services that does not fall within the category of employment income (for example, royalties earned by authors). Expenses that were necessarily incurred in earning the income may be deducted from gross income. An excess of expenditure over income may not be deducted from other income.

Real Estate Rental Income

Individuals renting out residential real estate may either itemize their deductions or take a standard deduction of 50% of the gross rental income.

Income From The Acquisition Of Goods

Income from the acquisition of goods includes goods received as donations, except exempt donations; treasure troves; goods acquired at a cost lower than their real value; and permanent constructions and improvements made to real property by the tenant when ownership of the construction or improvement is transferred to the owner. The tax authorities may require that the value of the goods be appraised by an expert. In the case of goods acquired at a cost below their real value, if the appraisal value is in excess of 10% of the agreed-upon price, the buyer is taxed on the difference.

Individuals who obtain income from the acquisition of goods may deduct federal taxes (except income tax), local taxes, and notarial expenses incurred for the purposes of the acquisition; expenses incurred in lawsuits establishing the right to acquire; and appraisal expenses and commissions paid by the acquirer.

Income From The Transfer Or Disposition Of Goods

Capital gains realized by individuals from the transfer of immovable property, securities, and personal property are taxed as income from the transfer or disposition of goods. Acquisition cost is reduced by depreciation under rules that vary according to the nature of the asset sold. That reduced acquisition cost is then adjusted for inflation on the basis of a factor for the period from the date of purchase to the date of sale. The adjustments to be made in the case of shares are similar to those applying to companies (see "TAXATION OF RESIDENT ENTITIES"). In the case of real property, payments made for real estate appraisals, both in relation to acquisitions and sales, are deductible. To arrive at tax rates, the gain must be divided by the number of years that have elapsed between purchase and sale, subject to a maximum of twenty. The resulting amount is added to the individual's taxable income for the year. The amount of the gain not added to taxable income is taxed separately at the average effective rate applicable to the individual's taxable income for the year (including the portion of the gain added to income) or at rates over the last five years.

Income From Business Activities

Individuals who carry out business activities must determine their business tax earnings (total income from business activities less authorized deductions, including tax losses carried forward). The rules for determining taxable income and provisional payments of income tax and for setting off losses are similar to those described at "TAXATION OF RESIDENT ENTITIES" for companies. Business tax earnings are not added to income obtained from other categories; a fixed rate of 34% is applied instead of the rates applying to other income. However, individuals who obtain income from business activities may opt to add to their other income any withdrawal or earnings, in which case the accruable amount is that resulting from multiplying these earnings by the factor of 1.515. Tax at the rate of 34% of the accruable amount may be credited.

Individuals engaged in business activities whose income for the previous year did not exceed Ps$1,484,533 (as of January 1996) may opt to have their taxable income from those business activities determined on a simplified basis. Special rules also apply to some low-income retailers.

Dividend Income

Dividend income includes profits distributed by resident companies; profits obtained by shareholders of resident companies from repayments arising in the course of a liquidation or capital reduction; and loans to shareholders, except those that are a normal result of company transactions or are for less than one year at an interest rate equal to or higher than that established yearly for late tax payments. Companies that make distributions to their shareholders must pay tax at the rates given in "WITHHOLDING TAXES". For residents and nonresidents alike, this tax is generally final. For individuals, this rule means that they do not have to add dividends to other income in calculating tax payable. However, resident individuals whose level of income gives them an effective income tax rate below the maximum rate of 35% may add an adjusted figure for dividends received to the other income earned during the calendar year. The adjusted figure for 1996 is determined by multiplying the actual dividend by a factor of 1.515. Tax at the rate of 34% of the adjusted figure may be credited to annual income tax.

Interest Income

Interest income includes interest derived from any class of bonds, debts, financing granted by credit institutions, securities quoted on the Mexican stock exchange, and exchange gains on transactions denominated in a foreign currency but payable in Mexican pesos. Certain items of interest are regarded as other income (see below).

Income From Prizes

Income from prizes includes income from lotteries, raffles, games of chance, and contests. Income tax is charged at special rates of 8% on prizes of up to Ps$8 and 15% on prizes over that amount.

Other Income

Other income includes all income of individuals that does not fall within any of the other categories and is not expressly exempt from tax. Various types of interest are regarded as other income, including interest on credit documents or credit acquired from or transferred to persons other than credit institutions or the stock exchange. The taxable amount of interest derived from such credit documents or credit is arrived at by deducting the inflationary component from nominal interest, which means that tax is incurred only when interest earned exceeds inflation for the period. If inflation is higher, the individual may deduct the inflationary loss. Other types of interest regarded as other income, including exchange gains treated as interest, are taxable. Other income for individuals also includes that arising from derivatives, in which case the same rules applicable to corporations are followed to determine accruable gain or deductible loss and interest.

Exempt Income

Exempt income includes fringe benefits provided to individuals earning only the general minimum wage for their geographical area, as long as the benefits do not exceed the minimum amounts prescribed by labor law; for employees earning more than the general minimum wage, a portion of vacation bonuses and profit-sharing payments; a portion of overtime pay and pay for work on nonworking days; a portion of retirement and pension fund benefits; as a rule, income from savings funds established by companies; severance or retirement pay received from employers, up to specified limits; fringe benefits such as scholarships for employees and their children, provided that they are extended to all employees; gains on the sale of a home if the taxpayer lived there for at least two years prior to the sale; gains on sales of specified shares or other securities traded through an authorized stock exchange or similarly active market; income from specified derivatives related to publicly traded shares or securities; gains on sales of other personal property, up to specified limits; yields on treasury certificates and some other bonds issued by the federal government if various conditions are met; inheritances; gifts to immediate family members; other donations that do not exceed specified limits; and royalties on copyrights for musical and literary works if conditions are met.


In addition to the deductions that are allowed under the rules for each category of income, individuals may claim personal reliefs. A general credit may be claimed against the final tax liability, equivalent to 10% of wages at the annual general minimum salary, restated semiannually. Deductions include medical and hospital expenses for the individual and dependents, to the extent that they are paid to persons or institutions resident in Mexico; funeral expenses for dependents; donations to authorized institutions; and voluntary employee contributions toward retirement insurance.

In addition, residents may deduct from their total income deposits made in the tax year in special personal savings accounts, pension plan insurance premiums paid to Mexican institutions, and the cost of shares in specified investment companies. These deductions may not, in total, exceed in any calendar year Ps$69,237 (as of January 1996). When the deposits are withdrawn, the pensions collected, or the shares sold, the proceeds are treated as other income (see "Other income" above) for the year in which the event occurs. However, the applicable tax rate may not exceed that in force for the year in which the deposits or other payments were made. These transactions are subject to a withholding tax of 35%. If this withholding results in an overpayment of tax on total income, the taxpayer may set off the overpayment against future tax payments or may request a refund.

All individuals are entitled to tax credits that take into account both the income receivable and the tax chargeable on that income. In effect, the lower the amount of the individual's income, the higher the amount of the credit. The credits are calculated according to tables (see Table B for an example).

                      TABLE B
             TAX CREDITS AS OF JANUARY 1996

       MONTHLY INCOME                     TAX WITHHELD

Lower Limit     Upper Limit      Fixed Amount      Rate on Excess
   (Ps$)           (Ps$)            (Ps$)        over Lower Limit (%)

     0.01          193.31             -                  50
   193.32        1,640.72            2.89                50
 1,640.73        2,883.41           75.27                50
 2,883.42        3,351.85          180.89                50
 3,351.86        4,013.06          239.46                50
 4,013.07        8,093.79          345.24                40
 8,093.80       12,756.93          883.89                30
12,756.94       16,187.56        1,359.53                20
16,187.57       19,425.05        1,599.68                10
19,425.06            -           1,712.99                 -


The rules for deducting losses on business activities are similar to those applying to companies (see "TAXATION OF RESIDENT ENTITIES"). Capital losses must be divided by the number of years that fall between the date of purchase and the date of sale of the asset, up to a maximum of ten years. The resulting portion of the loss may be deducted from taxable income in the year of sale only. The remaining capital loss (excess of the total capital loss less the current-year deduction) may offset capital gains in the next three years by way of a tax credit.

Recoverable tax is calculated by multiplying the remaining capital loss by the individual's average effective tax rate in the year in which the loss was suffered or, if no tax was payable in that year, by the rate for the next year in which tax is due, provided that the year falls within three years of the year of loss. Recoverable tax determined in this way is credited in the subsequent three years against tax due on capital gains and not against tax due on other categories of income.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Deirdre Silberstein, Deloitte & Touche, Washington on +1 202 955 4000 or enter a text search 'Deloitte & Touche' and 'Business Monitor'.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions