Setting up a company in Mexico offers significant opportunities thanks to its strategic location, trade agreements, and growing domestic market. However, to operate efficiently and avoid legal pitfalls, understanding the country’s corporate income tax (CIT) framework is essential. Moxigerfc by Damalion provides a clear overview of Mexico’s corporate tax system for newly established companies.
Corporate Income Tax Rate in Mexico
Mexico applies a flat corporate income tax rate of 30% on the taxable income of resident companies. This rate applies to all local corporations, including Sociedad Anónima (SA) and Sociedad de Responsabilidad Limitada (SRL).
Companies are considered Mexican tax residents if their principal place of administration or effective management is in Mexico. This means that foreign companies with effective management located in Mexico may also be subject to this 30% tax on worldwide income.
Taxable Income and Deductible Expenses
Corporate taxable income is calculated based on gross income minus allowable deductions. Income includes all revenues from business activities, including sales, services, interest, and royalties.
Allowable deductions include:
Cost of goods sold (COGS)
Salaries and social security contributions
Rent and utilities
Interest on business loans
Depreciation of fixed assets
Professional services and administrative expenses
Taxes paid (excluding income tax)
It’s important to maintain accurate financial records and accounting systems in line with Mexican Financial Reporting Standards (NIFs) to support these deductions.
Annual Tax Return and Monthly Payments
Mexican companies must file an annual corporate income tax return by March 31 of the following fiscal year. The fiscal year in Mexico typically follows the calendar year.
In addition, companies are required to make monthly advance payments (Pagos Provisionales) of estimated income tax. These advance payments are calculated based on the previous year’s taxable income and help smooth the tax collection process throughout the year.
Withholding Taxes on Dividends
When distributing profits, Mexican companies must consider withholding tax on dividends. If dividends are paid from earnings that have not already been subject to corporate income tax, the company must first pay the corresponding CIT before the dividend is distributed.
Furthermore, there is a 10% withholding tax on dividends paid to individual shareholders and non-resident investors, unless a double taxation treaty (DTT) provides for a reduced rate. Mexico has signed DTTs with over 50 countries, including the U.S., Canada, Germany, Spain, and the UK.
Loss Carryforwards and Incentives
Mexico allows companies to carry forward net operating losses (NOLs) for up to 10 years. This can significantly reduce future tax liabilities when the company becomes profitable.
Additionally, certain sectors benefit from fiscal incentives, such as the maquiladora (IMMEX) program, which offers tax advantages for companies engaged in export-oriented manufacturing. There are also incentives for investments in technology, renewable energy, and R&D.
Transfer Pricing and Related Party Transactions
Multinational groups operating in Mexico must comply with transfer pricing rules aligned with OECD guidelines. Transactions with related parties must be conducted at arm’s length and documented thoroughly. Annual Transfer Pricing Documentation must be maintained and submitted when required.
VAT and Other Taxes
While not part of CIT, new companies should also be aware of Value-Added Tax (VAT) obligations. The standard VAT rate is 16% and applies to most goods and services. Companies must register for VAT and file monthly VAT returns.
Other taxes that may apply include:
Payroll tax (impuesto sobre nóminas)
Social security contributions (IMSS, INFONAVIT)
Local business taxes, depending on the state
Final Thoughts
Understanding Mexico’s corporate income tax system is essential to successfully operate and remain compliant. With a flat 30% tax rate, monthly advance payments, and a strict reporting regime, proper planning and expert local support can make a significant difference.
At Damalion, we help foreign entrepreneurs and investors set up compliant and tax-efficient business structures in Mexico. Contact us today to get started with a tailored corporate setup and tax compliance strategy.
Please contact your Moxigerfc team to register your company in Mexico
10 Best Restaurants in Monterrey, Mexico
1. Pangea
A culinary institution in Monterrey, Pangea offers contemporary cuisine under the direction of Chef Guillermo González Beristáin. Recognized with a Michelin star, it provides an unforgettable dining experience with a focus on flavor, aroma, and texture.
2. Koli Cocina de Origen
Koli Cocina de Origen is a Michelin-starred restaurant that celebrates Mexican heritage through its innovative dishes. The menu reflects a deep respect for local ingredients and traditional cooking techniques.
3. La Nacional
Known for its superb steaks, La Nacional is a Monterrey institution that offers a refined dining atmosphere. The restaurant combines high-quality beef with exceptional service, making it a favorite among locals and visitors alike.
4. Cara de Vaca
Cara de Vaca stands out for its diverse culinary offerings, including Italian, Chinese, American, barbecue, and Guatemalan cuisines. The restaurant boasts a cozy ambiance and attentive service, making it a popular choice for various palates.
5. Campomar
Specializing in seafood, Campomar brings the flavors of the Pacific Coast to Monterrey. With a focus on freshness and quality, it’s a go-to spot for seafood enthusiasts seeking authentic dishes.
6. El Gaucho
El Gaucho offers a traditional Argentinean steakhouse experience in Monterrey. Known for its high-quality cuts and classic preparation methods, it’s a haven for meat lovers seeking authentic flavors.
7. Mar del Zur
Mar del Zur combines Thai and Mexican cuisines to create a unique fusion dining experience. The restaurant’s innovative menu and elegant setting make it a standout choice for adventurous foodies.
8. Cuerno
Cuerno is renowned for its contemporary take on traditional Mexican dishes. With a stylish ambiance and a menu that emphasizes bold flavors, it’s a favorite among those seeking a modern dining experience.
9. Tatemate
Tatemate offers a contemporary Mexican menu that highlights the richness of local ingredients. The restaurant’s commitment to culinary innovation and quality makes it a must-visit for food enthusiasts.
10. Vernáculo
Vernáculo focuses on regional Mexican cuisine, delivering dishes that are both authentic and inventive. Its dedication to preserving traditional flavors while embracing modern techniques sets it apart in Monterrey’s dining scene.
Each of these establishments offers a unique dining experience that reflects the rich culinary landscape of Monterrey. Enjoy exploring these gastronomic delights!