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The new taxes in Mexico for 2010 - Summary

Feb 12, 2010

What is new on the Taxes Law for 2010 in Mexico?

  • Electricity bills are estimated to go up 6% during 2010.
  • Propane bills are estimated to go up 5% during 2010.
  • Telecommunications will go up 3% for 2010 (except rural & public home phones).
  • Beer goes up 1.5% for 2010.
  • Other alcoholic beverages go up 3% for 2010.
  • Cash Deposit Tax goes up from 2% to 3%.
  • Cigarette packs (20) go up $0.80 cents (MXP) or 10.9% up for 2010.
  • Earnings from any lottery games, casinos or any "bet/gamble" games are taxed now at 30% (before 20%)
  • Unique Rate Business Tax (for business owners) remains at 17%.

Income Tax (ISR - Impuesto Sobre la Renta)

  • Increase of the Income Tax rate from a maximum of 28% to 30% for 2010, 2011 and 2012
  • Decrease of this Income Tax rate to 29% in 2013
  • Decrease of this Income Tax rate from 29% to 28% in 2014
    • Mexico has now an ISR of 30% and an IVA of 11% (Baja) and 16% rest of the Country.
    • Chile has an ISR of 40% and an IVA of 19%.
    • Argentina has an ISR of 35% and an IVA of 21%.
    • Brasil has an IRS of 27.5% and IVA of 19%.
    • Worldwide ISR tax is 29%.
    • Mexico has one of the lowest tax collection rates (12.8%).

Value Added Tax (IVA - Impuesto al Valor Agregado)

  • 2009 IVA Tax was 10% for Baja California Sur & Baja California Norte (or border States)
  • 2009 IVA Tax was 15% for the rest of the Country

  • For 2010 the IVA Tax goes up 1% nationwide:

  • 2010 IVA Tax is now 11% for Baja California Sur & Baja California Norte (or border States)
  • 2010 IVA Tax was 16% for the rest of the Country

Cash Deposit Tax (IDE - Impuesto a Depósitos en Efectivo)

  • In 2008 a new tax was born:
    • The IDE Tax (IDE - Impuesto a Depósitos en Efectivo) or the Cash Deposits Tax. Also known as LIDE. ("L" stands for "Law").
    • As the Income Tax collection rate in Mexico have been extremely LOW since ever due to a lack of better practices/administration/control/creativity/corruption/et. al. from the Mexican Government, tax evasion has been a problem for years.
    • Any people or business not registered with "Hacienda" can make money on their own, thus not paying taxes at all.
    • The IDE Tax was created in 2008 as an attempt to raise the amount of Taxes/Money collected for the Government, all of this, using the Mexican Banking system, which is primary source of money collection/savings/deposits, etc., for people.
    • Only 53% of the "registered active Mexican population to perform economic activities" pay taxes. 46.5 million Mexican are registered (PEA - Población Económicamente Activa) and only 25 million people pay taxes.
    • Total population for Mexico as a Country (est.): 111 million

Which were the IDE tax rules for 2008-2009 with full support of the banks?

  • You have a bank account or "x" numbers of bank account in one bank
  • If you deposited more than $25,000 pesos in a month (all bank accounts taken in consideration no matter the currency), then any PESO extra from those $25,000 pesos became taxed immediately by the bank with a 2% IDE Tax.
  • If you deposited $30,000 pesos in a month, then $25,000 pesos were free, but $5,000 pesos deposited were taxed with 2%, meaning that those $5,000 pesos had to pay a tax of $100 pesos ($5,000 pesos multiplied by 2%), so your net deposit was $29,900 pesos.

  • Summary:

    • 2% Tax for deposits on sum of all your bank accounts for over $25,000 pesos a month
    • For 2008-2009, a cash deposit of $30,000 pesos cost you $100 pesos of IDE tax.

This strategy completely surpassed ANY expected projection and the Mexican IRS (Hacienda) collected more than 3 times what was expected. How this happened?

  • 99.5% of Mexican businesses are Micro, Small and Medium enterprises (in Spanish called PYMES - Micro, Pequeñas y Medianas Empresas). That means that the super small grocery store or taco stand in the corner are part of these universe of enterprises and they contribute with 15%-20% of the Income Tax revenue of all the Country.
  • 0.5% of Mexican business are the Large ones, and they are supposed to contribute with the 75%-80% of the Income Tax revenue of all the Country, but these very large enterprises are suspected to have "special deals" so they don't pay taxes, making the Mexican IRS have the need to get "more" Income Tax.
  • Then you have the fact that most of the PYMES earn very little money and if they have to pay Income Tax, then don't have anything left to support their families. If you are trying to have a "bigger" business with a couple of employees, then you have to pay Social Security costs which are BIG, and there are very little programs to help the PYMES in the country (lots of credits now, but no real solutions).
  • Over the years, this has created the huge "INFORMAL" market, where people have little businesses but don't pay taxes, but people no longer keep their money under their mattress or their safe boxes. They use the checking savings account, debit cards, etc., from the banks!
  • So the IDE Tax involved ALL THE BANKS (no matter the size) to "catch" these micro, small companies (1 to 5 employees) and apply a tax on any bank operation they make.
  • But also, these Tax looks forward to deal against Money Laundry issues and identify who makes the deposits or from where the money comes from, a big issue in Mexico (and many other Countries in the World).

What are the IDE tax rules for 2010 with full support of the banks?

  • Taking the same past example used for the 2008 rules above:
    • You have a bank account or 'x' numbers of bank account in one bank
    • If you now deposit more than $15,000 pesos in a month (all bank accounts taken in consideration no matter the currency), then any PESO extra from those $15,000 pesos becomes taxable immediately by the bank with a 3% IDE Tax.
    • Taking the 2008 example above, if you deposit $30,000 pesos in a month, then $15,000 pesos ere free, but $15,000 pesos deposited are taxable with 3%, meaning that those $15,000 pesos have to pay a tax of $450 pesos ($15,000 pesos multiplied by 3%), so your net deposit was $29,650 pesos.


    Summary:

  • For 2008-2009: 2% Tax for deposits on sum of all your bank accounts for over $25,000 pesos a month.
  • For 2010: 3% Tax for deposits on sum of all your bank accounts for over $25,000 pesos a month.
  • For 2008-2009, a cash deposit of $30,000 pesos cost you $100 pesos of IDE tax.
  • For 2010, a cash deposit of $30,000 pesos cost you now $450 pesos of IDE tax.

What can be taxed with the 3% IDE Tax?

  • Traveler Checks
  • Checks under the name "Al Portador" (to the "public")
  • "Cheques de Caja" (secured check with secured funds requested at any branch)
  • Pay your credit card with cash in another bank that is not the issuer bank
  • Currency exchange when using having a bank account (USD, CAD, EURO, etc.)
  • People receiving any loan deposits and does not have an RFC (Tax) number (starting July 2010)

Who won't be taxed with the 3% IDE Tax?

  • Deposits to bank accounts by check
  • Electronic transfers to bank accounts
  • Any electronic way of sending funds to bank accounts (wire transfer for example)
  • Non Profit Organizations
  • Municipal, State and Federal entities and Government companies
 
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