Co-written by Alejandro Enriquez-Mariscal
Since last year it has been discussed that Mexican companies are possibly withholding from their employees excess income tax. The reason for this excess withholding is that companies should not be including in the calculation of the employee subsidy the contributions paid to the Mexican Social Security Institute ("IMSS"), the National Housing Fund ("INFONAVIT"), or any state payroll tax.
We have recently received from our Tax Courts decisions confirming our position that contributions paid to the IMSS and the INFONAVIT, as well as the state payroll tax, should not be included in the calculation of the subsidy in favor of employees. Those who have filed an action and received these decisions can now make the creditable subsidy calculation without taking into consideration these concepts and without any risk of a future assessment.
In view of the above, it is strongly suggested to file a ruling request before the Ministry of Finance and Public Credit. If the outcome is favorable, then your company can make the calculation without taking into consideration the contributions paid to the IMSS and INFONAVIT, or the state payroll tax, without bearing any risk of an assessment. If the outcome of the ruling is unfavorable, it is necessary to file an appeal before our Federal Tax Courts, which, considering the recent precedents already secured, would most likely rule in favor of your company.
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.