Corporate tax or company tax is simply a form of direct tax, which is collected from the income of a corporation or a company by the authorities of a country. Different countries impose corporate taxes at either the national or state level. The type of entities that pay this tax includes the following.
- Indigenous companies,
- Foreign companies with permanent residence,
- Companies that use the income from the country to do business,
- None permanent companies, which also pay taxes.
Corporate tax is often levied on net profit, although this may differ from one location to another. Also, some companies that are into some peculiar types of businesses may not pay such taxes.
In Mexico, all companies, including domestic or foreign residential businesses, pay corporate tax through the Mexican Government’s tax authority.
Corporate Tax Mechanism
The Mexican Corporate Tax amount is 30%. It was higher in 1982 at 42% and lowest in 2007 at 28%. Resident and foreign companies that derive their income in Mexico are all subject to corporative taxation. Also, branches or subsidiaries of foreign companies may not pay corporate tax unless they make some income from the country.
The corporate tax in Mexico is payable on the profits of a company, which may include direct income from transactions, indirect income from transactions, and as well as capital gains. In some cases, the exception of certain expenses may occur when calculating the tax amount due. Also, inflation can be a factor when calculating the tax for certain forms of income and expenditures.
The dividends a Mexican receives from a resident Mexican company is not taxable. However, dividends collected by an individual from foreign businesses are taxable within a specific period, although credit is always available for withholding and corporate taxes.
Therefore, dividends generated from taxed revenue is given directly to owners without any taxation. Each resident company must keep track of all taxed revenue.
Domestic companies that deal with renewable energy businesses or investments may need to establish an exclusive revenue account, out of which each shareholder receives their dividends. However, if the dividend comes from a different account, a 30% corporate tax is applicable. Also, a withholding tax of 10% applies to all dividend payments.
In Mexico, real estate is not exempted from corporate tax unless a loss occurs. In such a case, a 10 year grace period applies, but it is subject to inflation conditions. When a real estate transaction takes place, some form of acquisition tax of about 6% is payable to the city’s authorities as a form of revenue. Yearly real estate tax is payable to the city where the structure is situated. This tax is directly payable at the city tax office.
Capital gains or corporate tax is payable after the trade of real estate properties. All revenue derived from fixed properties, real estate, or shares automatically become taxable at the rates of corporate tax.
All non-Mexicans that trade shares they own from Mexican businesses are to pay a tax of 20% of gross earnings or pay 35% for net earnings if such shareholders have representation within the country. All shares that are traded out by non-Mexicans may also have to provide 10% of earnings as withholding tax.