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Types of Tax Regimes in Mexico

The Types of Tax Regimes in Mexico

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An important factor for the taxpayer is to be able to define the development of its economic activities.

Thus, a taxpayer may carry them out as an individual or a legal entity, which will determine each case a different tax treatment, either in terms of the requirements or tax obligations that must be met.

Once the taxpayer has determined it, he/she will also be able to choose the type of tax regime to belong to.

There are different types of tax regimes in Mexico, according to the quality of the person. Thus, there are two tax regimes for legal entities and five for individuals under Mexican tax legislation.

This article briefly explains what these are.

What is a tax regime?

A tax regime is a set of rules and obligations in a given tax system that will regulate the tax situation of both a legal entity and an individual, depending thereon the tax level the Tax Administration Service can demand from the taxpayer.

What are the types of tax regimes in Mexico?

According to the Federal Tax Code, there are five tax regimes for individuals, such as:

  • Salaried employees regime.
  • Professional activities regime.
  • Real estate leasing regime.
  • Business activity regime.
  • Tax incorporation regime.

Likewise, legal entities can choose one of the following two tax regimes:

  • General regime.
  • Non-profit legal entities regime.

What do the types of tax regimes for individuals consist of?

The five types of regimes mentioned above consist of the following:

Tax Incorporation Regime (RFC)

Taxpayers engaging in a business or professional services activity, where a professional title is not required, and obtaining income in a fiscal year not exceeding the amount of two million pesos, are included in this regime.

Therefore, among the activities that can be included in this regime are the following:

  • Inns.
  • Beauty salons.
  • Stationery stores.
  • Butcher’s shops.
  • Fruit stores.
  • Mechanical workshops.
  • Others.

Business Activities Regime

Persons performing business, industrial, fishing, fishing, and agricultural activities may be included in this regime.

As in the case of the tax incorporation regime, a professional title is not required, whereby the activities described for the RFC may also be included in this regime. However, unlike the RFC, the business activity regime does not establish a maximum income amount.

Real Estate Leasing Regime

Individuals who lease or rent houses, apartments, buildings, commercial premises, among others, may be included in this regime.

Professional Activities Regime

Persons who independently provide professional services may be included in this regime.

Salaried Employees Regime

Those persons who provide professional services independently may be included in this regime.

The tax regimes for legal entities consist of the following:

General Regime

As the name of this regime indicates, mercantile corporations or companies, decentralized organisms commercializing goods, among others, performing any lucrative economic activity, may be included in this regime.

Non-Profit Legal Entities Regime

Entities not seeking to generate profits through their activities, such as charitable institutions, religious associations, employer associations, among others, may be included in this regime.

Some of the obligations of these types of tax regimes are as follows:

In the case of tax regimes for individuals, there are the following obligations: 

On the other hand, concerning the regimes for legal entities:

Recommendation

According to the aforementioned, the choice of the tax regime decided by the taxpayer will be of vital importance since the tax obligations to which the taxpayer will be subject will be determined thereon.

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