The purpose of this article is to inform you of the main changes in fiscal and tax laws for 2010. As you will notice these modifications, far from stimulating investment in the tourism and real estate sectors, -which provide significant support to Mexico’s economy-, are focused so that all tax payers make extra contributions that will serve to face the existing public deficit.

Among the changes on fiscal tax laws for 2010, we consider the following the most important (we recommend that you consult with a professional how these reforms will effect them individually as this document is just an overview of some of the reforms):

Yearly Income Tax

Increase in general rate

The tax rate which will be effective from 2010 to 2012 will be 30%, instead of 28%. This change will consequently cause an increase on tax calculations and payments. In the following paragraphs we will analyze some cases that could be affected.

Real estate activities

We must consider in future transactions there will be an additional 2% tax caused by the rate increase which must be covered by the seller.

Salaries

Employees net wages and salaries will be reduced motivated by a higher withholding tax rate. Wages over $11,000 pesos will retain an additional increase on its tax rate bracket between 2% and 5%, which means a decrease on wages in real terms. This case will have to be evaluated in detail due to the fact that most employers pay net salaries and will be absorbing this increase.

Exemption on the sale of primary residence

On the sale of primary residences, there is a tax exemption if the operation’s price does not exceeds the amount of a million and five hundred thousand UDIS (Approximately $500.000 USD) as long as during the  immediate previous five years to the sale’s  date  no  other  similar operation of primary residence has been executed and received this benefit. In  2009, only the second or later transactions during the same year were taxed, which allowed having the exemption benefit at least once a year. This is gone in 2010 and it is 1 per 5 years.

Also, it is reiterated the obligation for notaries to inform to authorities (SAT) on any house sale’s, and adds that the notary must inform sale’s amount and withhold the taxes of such operations.

Value Added Tax

Increase in rates

The tax rate is increased 1% and will be an effective tax of 16% (11% for operations in border regions). It is important to mention that the tax rate over real estate sales (only construction) which were made in border zones not for housing purposes is 16% on operation’s value.

Cash Deposits Tax

This tax burdens is on CASH deposits into bank accounts in Mexico that exceed $15,000 pesos a month.

For 2010 this tax rate goes up to 3% (2% in 2009) and the monthly cash deposit amounts is reduced from $25,000 (2009 maximum) pesos a month to $15,000 pesos a month.

Federal Fiscal Code

Digital receipts or “facturas” through SAT

An obligation is established to send digital invoices (facturas) through SAT’s web page, in the near future. Actual paper invoices will no longer be given once this enters into effect. The authority will authorize certain entities as official certifiers to provide official digital seals. This reform will be entering in force on January 1st 2011 and its main intention is that taxpayer will be able to get their own facturas online instead of printed facturas by official suppliers.

Complementary filings reported after authorities have started its fiscal revision faculties will not have any effect in favor of taxpayers

If after any fiscal audit has begun, a complementary tax return is made by the taxpayer regarding prior years to the year being reviewed and which could change fiscal auditors opinion or reduce any balance of taxes calculated by authorities in favor of taxpayer, such complementary filing will not be accepted. All mentioned returns of prior years will be consider as not reported.

As we mentioned on top of this article, it will be necessary that each situation be reviewed separately to identify and understand how those tax increases and modifications will impact your business.  

For more information please contact Gabriela Alicia Rojas Jiménez, grojas@mexicolaw.com.mx.