Mexican Tax Law: Payroll Taxes

The company shall be subject to a local state payroll tax which rate will depend on the location of the working facilities. On the other hand, the federal government also requires corporations to make social security and other labor related contributions which can amount to up to 35% of the payroll. Such contributions are as follows:

Social Security Contributions

Social security contributions must be withheld and paid by an employer and remitted to the Mexican Institute for Social Security every month. Additionally, employers are required to contribute to their employees’ Social Security. Both contributions will be based on a percentage of the employees´ wages. The following rates are applicable: (i) sickness and maternity—approximately 8.75% by the employer and 1% by the employee; (ii) invalidity—2.80% by the employer and 3.125% by the employee; and (iii) retirement fund, old age, severance pay—5.150% by the employer and 1.125% by the employee.

Housing

In addition to the contributions required by the Social Security law, the labor law establishes that employers must contribute to the National Worker's Housing Institute an amount equal to 5% of the employees' wages.

Premium for Occupational Risks

The employer must also pay a premium for each employee which is based on a percentage of the employee's salary and varies according to the risk level of a particular job. Such percentages vary from .54% for administrative type employees to 7.5% for employees engaged in heavy industry.

Payroll fees and taxes are deductible for income tax purposes.

Return to top