MEXICO Law and Practice Contributed by: Javier Díaz de León, Monica Ramos and Martín Cortina, Díaz de León Abogados
Díaz de León Abogados Bosque de Radiatas 6 – Floor 2 Bosque de las Lomas 05120 Ciudad de Mexico Mexico
Tel: +52 553 433 2532 Fax: +52 553 433 2532 Email: jdiaz@ddlg.mx Web: www.ddlg.com.mx
1. Tax 1.1 Tax Regimes Individual Residents
Taxation of estate, inheritance and gifts The transfer and receipt by inheritance of Mexican and/or foreign assets are generally not subject to fed - eral taxation in Mexico. However, Mexican heirs and legatees must report the estate income in the applica - ble annual income tax return. Otherwise, the tax-free regime may be lost at the levels of heirs and legatees. Individuals are not subject to income tax with respect to gifts ( donaciones ), provided the gifts are between spouses or from ascendants to descendants, in any amount, or from descendants to ascendants under the condition that the received assets are not further transferred by the ascendant to other descendant. Any other gifts may become subject to income taxa - tion at the level of transferee under the Income Tax Law. Despite Mexico having not adopted taxes on inherit - ances or gifts, note that foreign residents may become subject to withholding of income tax in Mexico when they receive as transferee Mexican real estate or shares for free, including transfers by inheritance or gifts (other than gifts between spouses or from ascendants to descendants which qualify for tax-free treatment). Careful planning is required regarding for - eign life insurance, which benefits may also become subject to taxation in Mexico for Mexican heirs and legatees given that it is a non-Mexican insurance pre -
The Mexican tax system provides separate specific tax regimes applicable to individuals, estates, trusts and foundations. Mexican resident individuals are subject to income taxation on a worldwide basis at a tax rate ranging from 1.92% to 35%, and poten - tially VAT at a rate of 16%, depending on the type of income derived in the calendar year. Domestic and foreign dividends are additionally subject to a 10% income tax exclusively on individual residents. Sal - ary compensation, including stock options, interest, profits, dividends, capital gains and foreign income, is regulated in separate chapters of the Income Tax Law, providing specific recognition and deduction rules. Estates, Inheritance and Gifts General tax regime The legal representative of the estate, commonly the executor ( albacea ), is responsible to quantify and pay on an annual basis the applicable income tax on behalf of heirs and legatees at the tax brackets men - tioned under “Individual Residents” above, based on the revenue produced by the estate from the date of death to the final estate liquidation, pursuant to the applicable civil law provisions. The income tax paid is a final tax unless heirs and legatees opt to individually recognise the estate´s income. The legal representa - tive is also required to make advanced income tax payments against the annual income tax liability.
mium. Trusts Mexican trusts
The taxation of trusts depends mostly on their activi - ties, income and place of formation. Mexican trusts
426 CHAMBERS.COM
Powered by FlippingBook