TAX NEWS - January 2010

Mexico: Mexican tax reforms for 2010

Summary

Below is a summary of the latest tax reforms in Mexico that may have an impact on international employees.

Income tax law

- The maximum ISR rate for individuals is increased temporarily from 28% to 30% for fiscal years 2010, 2011 and 2012; for the year 2013, the maximum rate will be 29%, finally decreasing to 28% as of January 1, 2014.

- Please note that the rates were adjusted for individuals with monthly income in excess of $10,298.35, leaving the final tariff band with a tax rate of 30%.

- It is essential for companies to conduct a detailed analysis of the impact of these changes on the net remuneration paid to their workers.

- This is the annual tariff applicable from 2010 to 2012:





                                                                 Annual Tariff
Inferior Limit ($)     Superior Limit ($)      Fixed Quote ($)        % Applicable on the Exceeding of Inferior Limit
0.01                             5,952.84                      0.00                1.92
5,952.85                     50,524.92                   114.24                6.40
50,524.93                    88,793.04                2,966.76               10.88
88,793.05                  103,218.00                7,130.88               16.00
103,218.01                123,580.20                9,438.60               17.92
123,580.21                249,243.48               13,087.44               21.36
249,243.49                392,841.96               39,929.04               23.52
392,841.97                 Exceeding                73,703.40               30.00


Other important changes included in this bill are as follows:

- The separate regime (regimen cedular) for the interest earned by individuals from Mexican Banks will go into effect as of January 1, 2011.

- The exemption for individuals on the sale of their homes will be applicable when they prove that they have lived there for five years prior to the sale transaction.

- The reform to the personal deduction for individuals of real interest paid on mortgage loans is capped at approximately $6'000,000 pesos.

- The application of the 4.9% withholding tax rate has been ratified during 2010 for interest paid to foreign banks that are the effective beneficiaries and reside in a country with which Mexico has a tax treaty.


Cash deposit tax

The tax on cash deposits increases from 2% to 3% and the exemption limit is reduced from $25,000 to $15,000 a month.