Federal corporate income tax (CIT)
CIT applies to Mexican resident taxpayers’ income from worldwide sources, as well as to foreign residents from income derived from Mexican-source wealth and on the income attributed to their permanent establishments (PEs) located in Mexico.
The federal CIT rate is 30%.
All corporate entities, including associations of a civil nature, branches, etc., are subject to the tax rules applicable to Mexican corporations (unless specifically ruled out, such as not-for-profit organisations).
Corporate taxpayers engaged exclusively in agriculture, livestock, fishing, and forestry activities are subject to a reduction of 30% of their tax liability.
Provisions to recognise the effects of inflation for tax purposes in the areas of monetary assets and liabilities (annual monetary adjustment) and depreciable assets are provided in the Mexican Income Tax Law, even though recent inflation rates have been stable at low levels.
Once a corporation has paid its CIT, after-tax earnings (i.e. earnings arising from the after-tax earnings account, Cuenta de Utilidad Fiscal Neta or CUFIN) may be distributed to the shareholders with no tax charge at the corporate level. A withholding tax (WHT) on dividend payments to individuals or foreign residents (including foreign corporations) applies at the rate of 10%; this WHT does not apply to distributions of profits subject to corporate-level tax prior to 2014. If a corporation makes a distribution out of earnings that for any reason have not been subject to CIT, such as distributions of book earnings (i.e. not yet recognised for tax purposes in Mexico), the corporation will also be subject to CIT on the grossed-up distributed earnings (gross-up factor is 1.4286).
Tax paid on dividends distributed in excess of CUFIN can be credited against the CIT of the year or in the two fiscal years following the year in which the tax on the non-CUFIN distributions was paid. The CUFIN of the tax years in which the credit is applied must be reduced by an amount equal to the grossed-up dividend distribution.
Local income tax
There are no state taxes on corporate net income.