Types of taxes in Mexico
Mexico is one of the member countries of the OECD (Organization for Economic Co-operation and Development), which has a rather low tax burden. In the United Mexican States, taxes are divided into three types: federal, state and local, and each of them has different characteristics and regulations. We explain them in detail below.
Federal taxes
These taxes are collected by the state and applied throughout the national territory. They are anchored in federal law and the Income Tax Act (ESR) and are responsible for financing federal government spending and programs. The most important federal taxes include:
Income Tax (ISR)
This direct tax is imposed on the profits made in a given year. It is a tax levied directly on the difference between income and allowable deductions.
Value Added Tax (VAT)
This is an indirect consumption tax that taxes the supply of goods and the provision of services.
Special Tax on Production and Services (IEPS)
This tax is levied on the production and sale or import of alcohol, beer, gasoline, diesel and tobacco.
Tax on new cars (ISAN)
This tax is levied on the sale of new vehicles to consumers or upon their importation into the country, provided they are sold to persons other than the manufacturer, authorized dealer or distributor of the vehicles.
State taxes
They apply within the borders of the respective federal state and are not transferable to others. They are established by each region’s legislature and fund local spending and programs. This means that each federal unit decides its tax rules and the taxes to be collected.
Municipal tax
Municipal taxes are a type of levy levied by local municipalities and do not provide any direct benefit to the taxpayer. The local tax office is responsible for establishing the criteria for collecting municipal revenue in accordance with Article 115 of the Constitution