Strictly, the federal tax on assets (impuesto al activo) or net worth does not constitute the type of mini-mum income tax that exists in other countries, but its objectives are similar. Income tax may be credited against the tax on assets. Thus, if income tax due is equal to or greater than tax on assets, no additional tax is levied.

Those that must pay the tax include resident companies and individuals engaged in business activities and permanent establishments of nonresidents (on assets attributable to those establishments). Companies in the financial sector, most investment companies, and companies that are not subject to income tax are exempt, provided that they do not grant temporary use or enjoyment of their assets to persons obliged to pay the tax.

Tax on assets is charged at 1.8% on the average value of the taxpayer's assets over the year, generally determined as follows:

Sum of monthly    Average of       Average of    Average of    Value
averages of    +  investments  +   inventories - liabilities = of  financial         in land,                       after         assets
assets            other fixed                    specified
DIVIDED BY        assets,                        reductions
Number of months  and intangible
in period         assets

Rules are prescribed for determining these averages. Taxpayers may adopt an alternative procedure under which they pay tax for the current year that is equal to the tax adjusted for inflation that they would have paid in the fourth year following that for which tax is determined.


Value added tax (VAT) is levied on individuals and companies (including nonresidents with establishments in Mexico) that sell goods, provide services, grant temporary use or enjoyment of goods, or import goods and services. VAT is computed by crediting taxes paid on purchases against tax liabilities arising from sales. It is charged on the total selling price of the goods, rights, or services and on the value of imported goods or services. The total selling price includes additional charges for expenses. Taxes paid to acquire and use goods and services may not be credited when the related expenses are not deductible for income tax purposes, and if the expenses are only partially deductible, the tax may be credited only in the proportion in which the expenses are deductible.

The general VAT rate is 15%. The rate is 10% on most activities carried out by border residents. Some activities, such as the sale and import of foods and patent medicines, are zero rated. Exports are also zero rated. Exemptions include sales of land and construction used or to be used for residential purposes; books, newspapers, magazines, and copyrights; notes receivable and credit instruments (including shares); and prescribed educational services. Some imports are exempt, including returns of goods temporarily exported, goods in transit or subject to reshipment, and goods and services that would be exempt or subject to the zero rate if supplied within Mexico. When goods and services are exempt from VAT, the seller or supplier must not charge VAT and cannot recover any VAT incurred.


Special production and services tax is payable by companies and individuals that are engaged in the import or sale of beer and other alcoholic beverages, table wine, and cider; processed tobacco; or oil industry products. The provision of services by com-mission or mediation agencies and the provision of representation services arising from the sale of goods subject to the special production and services tax also give rise to liability.

Like VAT, this tax is paid by the consumer. It is charged in addition to VAT. Tax rates range from 0% on certain exports up to 85% on the sale of processed tobacco.


Social security contributions are based on daily wages. The rate is 15.7% for employers and 5.25% for employees. The pay ceiling is twenty-five times the general minimum wage in the Federal District for sickness and maternity insurance and ten times this minimum wage for disability and old age pensions and obligatory retirement and death payments.

Employers must pay 2% of the integrated wage of each employee, up to a maximum of twenty-five times the general minimum wage in the Federal District, by means of a deposit at a domestic credit institution in an individual savings account for employee retirement. Employers must make National Housing Fund contributions of 5% of salaries, up to a maximum of ten times the general minimum wage in the Federal District, as a deposit for their employees to obtain financing for housing purchases, construction, and improvements. The Federal District and many states levy an additional payroll tax on employers domiciled in their jurisdictions. The rate is 2% in the Federal District.

A new social security system will come into effect on 1 January 1997. The preceding discussion is based on the existing system. All details of the new system are not yet known, but it is expected that companies that pay employees minimum-wage or near-minimum-wage amounts will have a higher cost, as will companies that report a large number of job-related accidents.


Real estate acquisition tax is a state tax levied on individuals and companies that acquire real estate in Mexico. The rates are determined by each state. The tax base is the value of the real estate. This tax is also incurred on mergers and divisions, even though no sale of real estate takes place.


Real estate property tax is a state tax levied on owners of real estate. The tax base is the officially registered value of the property as determined by the taxpayer per appraisal value or by unit values of the property provided by local tax authorities. The rates are determined by each state; as a rule, the tax charged is not burdensome.


Vehicle possession and use tax is paid by owners of automobiles, buses, trucks, tractors not used for farming, airplanes, ships, sailboats, motorized water skis and surfboards, and motorcycles. Some exemptions exist. Rates are determined yearly and vary with make and model.


New car tax is paid in addition to VAT on sales of new automobiles into Mexico. However, per recent changes, an exemption applies for 1996. The tax will be repealed in 1997, but it may still be imposed at the state level. Individuals and companies must pay fees assigned annually by Congress for a variety of public services provided by the government. Fees must also be paid for the use and enjoyment of government property and the exploitation of mineral and metal deposits.

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'.