Tax Obligations and Mexican Tax Administration System

Published May 3rd, 2022

Being a taxpayer in Mexico, you acquire rights and obligations by default. It is essential to know the regime we are in to correctly perform the mandatory process of paying tax since once income is received for providing a service or for commercializing a product, people must comply with several obligations.

Therefore, it is important to know what is the SAT and what are the various tax obligations: ISR, VAT, IEPS, and taxes for employees.

The SAT or Tax Administration Service: It is a dependency of the Federal Public Administration that is in charge of the collection, taxation, and surveillance of the fulfillment of fiscal obligations.

The ISR, which is the income tax: As its name says, is almost like a rent that we pay to the federation for living in the country. The ISR applies to all income entering any individual’s bank account, whether it is greater or less than 15 thousand pesos. If it is determined by SAT that the money is from income (not from a loan or credit, for instance) it will be counted and taxed accordingly. There is a common belief that you do not pay taxes on cash deposits of less than 15 thousand pesos. However, the tax must be paid from the 0.1 cents that come into the account. The SAT can ask for your bank records and review them.

VAT or Value-added tax: A 16 percent value-added tax is added when acquiring goods or services in Mexico. It is a general tax that is passed on to the federal government and not registered as part of a business’s or an individual’s income.

“If I charge one thousand pesos and they pay me VAT (to invoice, for example) I have to declare it to the SAT. VAT is not part of the income”.

IEPS, Special Tax on Production and Services: The IEPS is paid on the production and sale of certain products, such as gasoline or some foods classified as high calories or harmful to health, such as soft drinks, tobacco, or alcohol.

Tax for employees: Some taxes are reported to SAT for having employees registered in some tax regimes. IMSS and INFONAVIT are some of the taxes an employer must report for each of their employees.

Now that you have a little more information about what the SAT is and your fiscal obligations, perhaps it would be a good idea to contact an expert who can guide and provide you with legal advice. If you were to miss any tax payment that you must comply with, you could accrue a tax debt, which would lead to a fine that varies depending on the amount and the time over which the payment was missed. In extreme cases, a seizure may be issued.

“Ignoring fiscal responsibilities is a risk to your patrimony.”

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