In Mexico, the tax regime does not depend on the person, but on his source of income. The same individual can simultaneously work for a salary, run his own business, rent out real estate and receive interest on bank deposits. As a result, one taxpayer can have several tax regimes and tax obligations, with their own tax rates.
The tax regime (Régimen Fiscal) determines the rules for taxing a specific type of income. Salaries are subject to the Sueldos y Salarios regime. Business activities have the right to be taxed through the simplified RESICO regime or the general taxation regime. Renting out real estate has its own tax rules. Bank interest is accounted for separately. Dividends and investment income also have special tax rules.
We talked about tax regimes for individuals in Mexico in thispublications.
But at the same time, all income is taken into account under one RFC tax number. In other words, one individual may have several tax regimes.
Here are the most common combinations of tax regimes in Mexico.
Employment and simplified tax regime RESICO. This is one of the most popular combinations among foreign residents. Specifically, a person works for a Mexican company, receives a salary, and additionally provides consulting services as an independent professional. Salaries are taxed through the Sueldos y Salarios regime, while consulting income is taxed through RESICO.
Employment and real estate rental. The owner of the apartment has the opportunity to simultaneously receive wages and register income from renting out the property. Rental income is accounted for separately from wages.
RESICO and property rental. An individual can simultaneously register income from business activities and from rental real estate. Each type of income is taxed in its own tax regime.
Employment and bank interest— another very common combination. The bank withholds part of the tax automatically, but such income must still be taken into account when filing the annual return.
The most important point is that the Mexican Tax Authority (SAT) considers each source of income separately, as an economic activity. Incomes do not automatically mix with each other. Each regime has its own rules for calculating taxes, applying deductions, filing returns and generating electronic CFDI invoices. For this reason, as the number of sources of income increases, accounting becomes more complex.
One of the most frequently asked questions — Do you need to submit one declaration or several if you work in different modes? When it comes to monthly ISR income tax returns, they are usually filed separately for each liability (mode), rather than one general return for all types of income. Income from different regimes is not mixed into one monthly ISR calculation. In this case, the salary is usually declared by the employer, while entrepreneurial activity, RESICO or real estate rental require independent fulfillment of the corresponding obligations to the SAT.
But the annual declaration of an individual is usually one. It collects all income received during the calendar year. But certain regimes, including RESICO, have special rules for accounting and reporting income. Therefore, the presence of one annual declaration does not mean that all income is taxed in the same way.
If you use tax deductions, they also apply to each regime separately, since deductions vary by regime. Consequently, the presence of several tax regimes, taking into account deductions, complicates the calculation of the final tax result.
The presence of several tax regimes for one taxpayer is in itself normal. Problems typically arise when separate sources of income are not reflected, CFDI electronic invoices are incorrectly issued, and the taxpayer does not understand what obligations apply to each treatment. The more sources of income, the more important it is to control your tax obligations.
Along with additional income, additional responsibilities arise: different accounting rules, the specifics of applying deductions and the procedure for calculating taxes. For this reason, before registering a new type of activity or switching to the RESICO regime, it is worth understanding in advance how the new source of income will be combined with existing tax obligations.