Mexico Payroll Information – Deel Global Payroll

Updated on: 2025/08/04 14:35 (UTC)

Overview

Mexico, which officially is known as the United Mexican States, is a federation of 31 states and the federal district of Ciudad de México (Mexico City). Mexico is bordered to its north by four states of the United States of America, which from west to east are California, Arizona, New Mexico, and Texas. The countries of Belize and Guatemala border Mexico to its southeast. The Gulf of Mexico is to the immediate east of Mexico, and the western part of the Caribbean Sea borders Mexico to its southeast. Mexico is bordered to its west by the Pacific Ocean. While the main part of Mexico is located on the mainland of North America, Mexico includes numerous islands, the largest of which is Isla Tiburón (Tiburón Island) and the two most populous of which are Isla del Carmen (Carmen Island) and Cozumel. In Spanish, which is the predominant language of Mexico, the country’s common name is rendered as México and its full name is rendered as Estados Unidos Mexicanos.

The 31 states of Mexico are Aguascalientes (Hot Waters), Baja California (Lower California), Baja California Sur (South Lower California), Campeche, Chiapas, Chihuahua, Coahuila, Colima, Durango, Estado de México (State of Mexico), Guanajuato, Guerrero (Warrior), Hidalgo, Jalisco, Michoacán, Morelos, Nayarit, Nuevo León (New León), Oaxaca, Puebla, Querétaro, Quintana Roo, San Luis Potosí (Saint Louis Potosí), Sinaloa, Sonora, Tabasco, Tamaulipas, Tlaxcala, Veracruz (True Cross), Yucatán, and Zacatecas. Coahuila’s official name is Coahuila de Zaragoza, but Coahuila is more commonly used.

Mexico’s currency is the Mexican peso.

Employers in Mexico are responsible for federal income tax withholding and remittances, Social Security withholding and contributions, and state payroll tax payments. Employers are required to comply with the compensation and benefits provisions mandated in the Constitution of 1917 and the Federal Labor Law and regulated by the Ministry of Labor and Social Welfare (Secretaria del Trabajo y Prevision Social).

Foreign workers in Mexico are offered the same protections and legally-mandated benefits as resident workers. Mexican employers are required to have a workforce in which at least 90% of the workers are Mexican citizens.

Compliance rules that took effect Jan. 1, 2017, with regard to outsourcing payroll services in Mexico are outlined in a special perspective.

Mexico provides special treatment for businesses that qualify as maquiladoras. Maquiladoras are foreign-owned companies in Mexico that are able to import machinery and materials duty free, export finished products around the world and avoid permanent-establishment status for tax purposes.

Mexican citizens working in the United States are covered by U.S. tax law with possible treaty and work status exclusions applying. Work within the U.S. states and territories is covered by various labor laws.

CURRENCY DETAILS

The currency of Mexico is the Mexican peso (Mex$), also known as the Mexican new peso and known in Mexico as the new peso and simply as the peso. The internationally recognized three-letter currency code for the Mexican peso is MXN, which also is one of the currency’s commonly used currency symbols and is derived from Mexico’s internationally recognized two-letter country code of MX, and N as an abbreviation of new, with this currency code differentiating the Mexican new peso from the previous Mexican peso, now known as the old Mexican peso, which while no longer in use still is recognized with the three-letter currency code of MXP. The plural form of Mexican peso is Mexican pesos.

In Mexico, amounts of Mexican pesos are commonly written using the general dollar currency symbol $, which in addition to being used for all dollar currencies is used for some, but not all peso currencies. When an amount of Mexican pesos is written in Spanish, the predominant language in Mexico, using the currency symbol $, the symbol precedes the numerical value with a space or no space between the numerical value and symbol.

When an amount of Mexican pesos is written using the currency symbol Mex$, or one of its variants containing the symbol $ after the abbreviation Mex (Mex $, Mex.$, Mex. $, MEX$, MEX $, MEX.$, and MEX. $), to distinguish Mexican pesos from other peso currencies, the symbol precedes the numerical value with no space between the numerical value and symbol.

When an amount of Mexican pesos is written using the currency symbol $Mex, or one of its variants containing the symbol $ before the abbreviation Mex ($Mex., $MEX, and $MEX.) to distinguish Mexican pesos from other peso currencies, the symbol either precedes or follows the numerical value with a space between the numerical value and symbol.

When an amount of Mexican pesos is written using the currency symbol M$ or one of its variants (M.$, M $, M. $, and $M) to distinguish Mexican pesos from other peso currencies, the symbol precedes the numerical value with no space between the numerical value and symbol.

When an amount of Mexican pesos is written using the currency symbol MXN or one of its variants (MXN$, $MXN, and MXN $), the symbol precedes the numerical value with a space or no space between the numerical value and symbol.

One hundredth ( ¹ ⁄ ₁₀₀ ) of a Mexican peso is referred to as a centavo, with the plural form of centavos.

When amounts of Mexican pesos are written in Spanish, the comma that in English separates the thousands place from the hundreds place usually is rendered, which is an exception to the general rule in Spanish that a dot (.) is used to separate the thousands place from the hundreds place, although a dot sometimes is used in Mexican dialects of Spanish to separate the thousands place from the hundreds place. When amounts of Mexican pesos are written in Spanish, the dot that in English separates the ones place from the tenths place usually is rendered, which is an exception to the general rule in Spanish that a comma is used to separate the ones place from the tenths place, although a comma sometimes is used in Mexican dialects of Spanish to separate the ones place from the tenths place. Additionally, in Mexican dialects of Spanish, an apostrophe sometimes is used instead of a comma to separate the millions place from the hundred thousands place.

TAXES

The federal government enacts and enforces laws regarding income taxes and social taxes on a country-wide basis. The 31 states and the federal district assess payroll taxes on employers as well. Some of the states have tax agreements with each other to avoid double taxation. The Tax Administration Service (Servicio de Administración Tributaria, abbreviated as SAT) collects all income taxes while the Mexican Institute of Social Security (Instituto Mexicano del Seguro Social, abbreviated as IMSS) collects all social taxes.

In Mexico, the acronym ISR is often used to refer to income tax, as ISR is an abbreviation of the Spanish phrase impuesto sobre la renta, which translates to income tax.

The tax year is the calendar year, Jan. 1 to Dec. 31.

Coronavirus (Covid-19) Guidance: Employers having difficulty making employer social tax deposits to IMSS because of the new coronavirus pandemic may arrange to make installment payments of up to 80% of employer social taxes owed over periods of up to four years, with interest at rates ranging from 1.26% to 1.82%. Employers must deposit employee social taxes on time.

State payroll taxes:

In Estado de Mexico, effective for 2021, a 100% subsidy for payroll tax expenses is available for payroll taxes on compensation paid to workers who are at least 60 years old; first-time workers in new positions; workers who graduated from technical or professional training in 2019, 2020, or 2021.; for workers at businesses started in Estado de Mexico during the 2021 fiscal year, which runs from Jan. 1 to Dec. 31; and businesses that create new jobs for employees who lost their previous employment during the period from March to December 2020.

In Mexico City, effective Feb. 1, 2021, qualified employers in Mexico City will be exempted from 100% of payroll tax owed in January 2021 if they can certify that they have retained, or increased, their employee pool in December 2020.

Some micro and small employers established in perimeter A or B of the city’s historical center, are registered as a business in the city, and operate within certain sectors will qualify.

Those sectors include: coal, hotels, international agencies, leisure and sports activities, metal industries, paper, printing and publishing, personal services, movers repair and maintenance, some manufacturing, textiles, timber, and various mining companies.

In Guerrero, effective in 2021, employers may receive a 5% reduction in payroll tax for seniors, first-time workers, and disabled workers; an additional 5% reduction is available to new or expanding employers that maintain a 40% female workforce.

Also, new or growing employers may receive a reduction off the payroll tax of new employees in 2021 based on the company’s size. Those employers with:

5-9 workers may receive 15% off;
10-15 workers may receive 25% off;
16-75 workers may receive 35% off;
76-100 workers may receive 45% off;
101-125 workers may receive 55% off;
126-250 workers may receive 65% off; and
More than 250 may receive 80% off.

In Puebla, employers are exempt from up to 100% of payroll tax from January through March 2021. Employers with:

Up to 10 workers will receive a 100% reduction in payroll tax; and
11 to 50 workers will receive a 50% reduction in payroll tax;
Up to four employees will receive a 25% reduction in payroll tax for all of 2021, and
Workers at least age 60, first-time workers, or disabled workers will receive a 100% payroll tax exemption for any such employees for all of 2021.

Also, employers with more than 50 workers may postpone, without penalty, payroll tax payment for December to April 19, January to May 17, and February to June 17.

Additionally, employers that pay payroll tax for the entire fiscal year in one installment will get a 4% reduction in the tax.

Income Taxes

Coverage: Each business is considered a group of persons who assemble with a defined goal, for example, a mercantile society or civil institution, and is required to withhold taxes on individuals it employs. An individual is considered anyone with the capacity to make obligations and exercise his or her rights. Residents of Mexico are assessed income taxes on their global income although any double taxation should be offset through bilateral foreign tax agreements. Additionally, both resident and foreign workers are assessed income tax at the same rates.

Employee: An employee is considered any individual who provides subordinated work to another individual or enterprise.

Rates and Thresholds: Mexico’s federal income tax rates are levied on a progressive scale, with rates for residents ranging from 1.92% to 35% and rates for nonresidents ranging from zero to 30%.

Effective for 2021, for residents, Mexico’s personal federal income tax rates and minimum and maximum amounts of annual and monthly income for each tax bracket are as follows:

Range of Annual Income (Mexican Pesos)	Income Tax Rate for Annual Income	Range of Monthly Income (Mexican Pesos)	Income Tax Rate for Monthly Income
Up to Mex$7,735	1.92%	Up to Mex$644.58	1.92%
At least Mex$7,735.01 and up to Mex$65,651.07	Mex$148.51 plus 6.4% of the annual income in excess of Mex$7,735.01	At least Mex$644.59 and up to Mex$5,470.92	Mex$12.38 plus 6.4% of the monthly income in excess of Mex$644.59
At least Mex$65,651.08 and up to Mex$115,375.90	Mex$3,855.14 plus 10.88% of the annual income in excess of Mex$65,651.08	At least Mex$5,470.93 and up to Mex$9,614.66	Mex$321.26 plus 10.88% of the monthly income in excess of Mex$5,470.93
At least Mex$115,375.91 and up to Mex$134,119.41	Mex$9,265.20 plus 16% of the annual income in excess of Mex$115,375.91	At least Mex$9,614.67 and up to Mex$11,176.62	Mex$772.10 plus 16% of the monthly income in excess of Mex$9,614.67
At least Mex$134,119.42 and up to Mex$160,577.65	Mex$12,264.16 plus 17.92% of the annual income in excess of Mex$134,119.42	At least Mex$11,176.63 and up to Mex$13,381.47	Mex$1,022.01 plus 17.92% of the monthly income in excess of Mex$11,176.63
At least Mex$160,577.66 and up to Mex$323,862	Mex$17,005.47 plus 21.36% of the annual income in excess of Mex$160,577.66	At least Mex$13,381.48 and up to Mex$26,988.50	Mex$1,417.12 plus 21.36% of the monthly income in excess of Mex$13,381.48
At least Mex$323,862.01 and up to Mex$510,451	Mex$51,883.01 plus 23.52% of the annual income in excess of Mex$323,862.01	At least Mex$26,988.51 and up to Mex$42,537.58	Mex$4,323.58 plus 23.52% of the monthly income in excess of Mex$26,988.51
At least Mex$510,451.01 and up to Mex$974,535.03	Mex$95,768.74 plus 30% of the annual income in excess of Mex$510,451.01	At least Mex$42,537.59 and up to Mex$81,211.25	Mex$7,980.73 plus 30% of the monthly income in excess of Mex$42,537.59
At least Mex$974,535.04 and up to Mex$1,299,380.04	Mex$234,993.95 plus 32% of the annual income in excess of Mex$974,535.04	At least Mex$81,211.26 and up to Mex$108,281.67	Mex$19,582.83 plus 32% of the monthly income in excess of Mex$81,211.26
At least Mex$1,299,380.05 and up to Mex$3,898,140.12	Mex$338,944.34 plus 34% of the annual income in excess of Mex$1,299,380.05	At least Mex$108,281.68 and up to Mex$324,845.01	Mex$28,245.36 plus 34% of the monthly income in excess of Mex$108,281.68
At least Mex$3,898,140.13	Mex$1,222,522.76 plus 35% of the annual income in excess of Mex$3,898,140.13	At least Mex$324,845.02	Mex$101,876.90 plus 35% of the monthly income in excess of Mex$324,845.02

Effective for 2020, for residents, Mexico’s personal federal income tax rates and minimum and maximum amounts of annual and monthly income for each tax bracket were as follows:

Range of Annual Income (Mexican Pesos)	Income Tax Rate for Annual Income	Range of Monthly Income (Mexican Pesos)	Income Tax Rate for Monthly Income
Up to Mex$6,942.20	1.92%	Up to Mex$578.52	1.92%
At least Mex$6,942.21 and up to Mex$58,922.16	Mex$133.28 plus 6.4% of the annual income in excess of Mex$6,942.20	At least Mex$578.53 and up to Mex$4,910.18	Mex$11.11 plus 6.4% of the monthly income in excess of Mex$578.52
At least Mex$58,922.17 and up to Mex$103,550.44	Mex$3,460.01 plus 10.88% of the annual income in excess of Mex$58,922.16	At least Mex$4,910.19 and up to Mex$8,629.20	Mex$288.33 plus 10.88% of the monthly income in excess of Mex$4,910.18
At least Mex$103,550.45 and up to Mex$120,372.83	Mex$8,315.57 plus 16% of the annual income in excess of Mex$103,550.44	At least Mex$8,629.21 and up to Mex$10,031.07	Mex$692.96 plus 16% of the monthly income in excess of Mex$8,629.20
At least Mex$120,372.84 and up to Mex$144,119.23	Mex$11,007.14 plus 17.92% of the annual income in excess of Mex$120,372.83	At least Mex$10,031.08 and up to Mex$12,009.94	Mex$917.26 plus 17.92% of the monthly income in excess of Mex$10,031.07
At least Mex$144,119.24 and up to Mex$290,667.75	Mex$15,262.49 plus 21.36% of the annual income in excess of Mex$144,119.23	At least Mex$12,009.95 and up to Mex$24,222.31	Mex$1,271.87 plus 21.36% of the monthly income in excess of Mex$12,009.94
At least Mex$290,667.76 and up to Mex$458,132.29	Mex$46,565.26 plus 23.52% of the annual income in excess of Mex$290,667.75	At least Mex$24,222.32 and up to Mex$38,177.69	Mex$3,880.44 plus 23.52% of the monthly income in excess of Mex$24,222.31
At least Mex$458,132.30 and up to Mex$874,650	Mex$85,952.92 plus 30% of the annual income in excess of Mex$458,132.29	At least Mex$38,177.70 and up to Mex$72,887.50	Mex$7,162.74 plus 30% of the monthly income in excess of Mex$38,177.69
At least Mex$874,650.01 and up to Mex$1,166,200	Mex$210,908.23 plus 32% of the annual income in excess of Mex$874,650	At least Mex$72,887.51 and up to Mex$97,183.33	Mex$17,575.69 plus 32% of the monthly income in excess of Mex$72,887.50
At least Mex$1,166,200.01 and up to Mex$3,498,600	Mex$304,204.21 plus 34% of the annual income in excess of Mex$1,166,200	At least Mex$97,183.34 and up to Mex$291,550	Mex$25,350.35 plus 34% of the monthly income in excess of Mex$97,183.33
At least Mex$3,498,600.01	Mex$1,097,220.21 plus 35% of the annual income in excess of Mex$3,498,600	At least Mex$291,550.01	Mex$91,435.02 plus 35% of the monthly income in excess of Mex$291,550

Resident employees of religious institutions and other nonprofit institutions are taxed at different income tax rates from the aforementioned rates for residents.

Personal income tax brackets applicable to employment income paid to nonresidents are detailed in the Foreign Workers section of this primer.

Registration: Employers and employees must enroll in the Federal Taxpayer Registry (Registro Federal de Contribuyentes, abbreviated as RFC) on the SAT website before filing taxes.

Taxable Amounts: Income tax is levied on salaries and wages minus allowable deductions are subject to income tax. Some deductions include business expenses, donations to approved organizations and disabled and elderly employee deductions.

Withholding Methods: Income tax must be withheld from employee paychecks and paid to the Tax Administration Service (SAT) monthly.

Employment subsidy (Subsidio al Empleo): Low-income employees must receive a monthly subsidy towards their income tax liability. If the amount of the subsidy exceeds the amount of income tax the employee owes, the balance of the subsidy beyond the amount of tax owed is returned to the employee. Employers may subtract employees’ subsidies from remitted income tax. A statement of subsidies paid to employees for the previous year must be submitted to the SAT by Feb. 15 of each year.

Effective for 2021, unchanged from 2020, the amount of the subsidy is:

Range of Monthly Income (Mexican Pesos)	Amount of Monthly Employment Subsidy (Mexican Pesos)
Up to Mex$1,768.96	Mex$407.02
At least Mex$1,768.97 and up to Mex$2,653.38	Mex$406.83
At least Mex$2,653.39 and up to Mex$3,472.84	Mex$406.62
At least Mex$3,472.85 and up to Mex$3,537.87	Mex$392.77
At least Mex$3,537.88 and up to Mex$4,446.15	Mex$382.46
At least Mex$4,446.16 and up to Mex$4,717.18	Mex$354.23
At least Mex$4,717.19 and up to Mex$5,335.42	Mex$324.87
At least Mex$5,335.43 and up to Mex$6,224.67	Mex$294.63
At least Mex$6,224.68 and up to Mex$7,113.90	Mex$253.54
At least Mex$7,113.91 and up to Mex$7,382.33	Mex$217.61
At least Mex$7,382.34	Zero

Income tax withholding tables for residents’ employment income, and tables for the employment subsidy, applicable to 2021 and 2020, were published in Mexico’s gazette, Diario Oficial.

Returns and Remittance: Income taxes are paid on a monthly basis and returns must be filed on a monthly and annual basis. An employer’s monthly tax payments must be made by a date between the 17th to the 22nd of the following month depending on the sixth numeric digit on the employer’s RFC. Employers must file electronically through the Servicios de Declaraciones y Pagos on the SAT website.

Additionally, employers must file annual tax returns and may begin filing for the previous year in January. The deadline for filing an annual tax return is March 15. Employers can download the DEM on the SAT website. To both make monthly payments and file annual returns, employers must be registered and use SAT authorized banks.

Taxpayers are generally allowed to file up to three amended tax returns for a particular tax year provided an audit of that tax year has not been initiated by the Ministry of Finance and Public Credit (SHCP). There is a mechanism for obtaining deferral of outstanding tax liabilities with substantial financing charges.

Recordkeeping: Income tax returns can be audited for up to five years after they were filed. If the returns are amended, the statute of limitations for an audit extends to 10 years from the date taxes should have been filed.

Penalties: Mexico imposes penalties in a number of instances relating to failure to file a return, tax deficiencies and failure to comply with reporting requirements. Penalties generally will not be imposed where a taxpayer that has failed to file within the required time period independently files a late return before the Ministry of Finance and Public Credit (SHCP) has knowledge of the late filing or where the failure is due to circumstances beyond the taxpayer’s control. Penalties can range from Mex$1,400 for failing to file a tax return to Mex$34,730 for failure to make estimated tax payments.

Social Taxes

Social taxes in Mexico include numerous Social Security taxes administered by the Mexican Institute of Social Security (Instituto Mexicano del Seguro Social, abbreviated as IMSS) and a housing fund assessment administered by the Mexican Institute of the National Housing Fund for Workers (Instituto del Fondo Nacional de la Vivienda para los Trabajadores, abbreviated as INFONAVIT).

Social Security consists of an occupational risk fund to finance compensation for workplace illnesses or injuries; an illness and maternity fund; a disability and life insurance fund; a retirement, elderly unemployment, and aging fund; a retirement pension fund; and a day-care services and social benefits fund. The retirement, elderly unemployment, and aging fund became a private obligatory benefits fund on July 1, 1997, but individuals who already were enrolled in the pension before this still are entitled to the federal pension and employer contributions.

Additionally, INFONAVIT provides employees with loans. Employers must finance and make withholdings on employees’ monthly payments for this program.

Coverage: All employers are required to make IMSS and INFONAVIT payments and withholdings for the following:

employees who provide (on a permanent or temporary basis) a paid and subordinated service to other physical, moral, or economic units without legal personality;
employees of nonprofit organizations; and
employees identified through special decrees of the federal executive.

Effective since Jan. 1, 2017, employers in a designated special economic zone (SEZ) qualify for a reduction of 50% of Mexican social security taxes for the first 10 years of the SEZ regime. After the first 10 years of the SEZ regime, employers in these zones qualify for a reduction of 25% for the subsequent 5 years.

Rates and Thresholds: The amount of an employee’s wages upon which social taxes may be assessed is known as the base contribution salary (salario base de cotización, abbreviated as SBC). An employee’s base contribution salary is the average of payments to the employee, including but not limited to salaries and wages, gratuities, the cash value of benefits in kind, meal and lodging allowances, commissions, and bonuses. If an employee is paid less than the minimum base contribution salary, social taxes based on payments to the employee must be assessed as if the employee were paid at least the minimum base contribution salary.

If an employee’s base contribution salary is higher than the maximum base contribution salary, social taxes would be assessed on the employee and the employer based on the maximum base contribution salary.

Starting with 2017, the maximum base contribution salary applicable to social tax calculations is 25 times the unit of measure and update (unidad de medida y actualización, abbreviated as UMA). Before 2017, the maximum base contribution salary was 25 times the minimum wage. The UMA generally is annually updated Feb. 1.

Effective from Feb. 1, 2021, to Jan. 31, 2022, the daily maximum contribution base is 25 times the daily UMA value of Mex$89.62, which is Mex$2,240.50; and the monthly maximum base contribution salary is 25 times the monthly UMA value of Mex$2,724.45, which is Mex$68,111.25. Effective from Feb. 1, 2020, to Jan. 31, 2021, the daily maximum contribution base salary was 25 times the daily UMA value of Mex$86.88, which is Mex$2,172; and the monthly maximum base contribution salary was 25 times the monthly UMA value of Mex$2,641.15, which is Mex$66,028.75. Effective from Feb. 1, 2019, to Jan. 31, 2020, the daily maximum base contribution salary was 25 times the daily UMA value of Mex$84.49, which is Mex$2,112.25; and the monthly maximum base contribution salary was 25 times the monthly UMA value of Mex$2,568.50, which is Mex$64,212.50.

The daily minimum base contribution salary applicable to social tax calculations is the national standard daily minimum wage .

Two of the four types of assessments for funding illness and maternity insurance are exceptions to the general applicability of the base contribution salary as the amount of wages upon which social taxes may be assessed, although the applicable taxable amounts involve the unit of measure and update.

Disability and life insurance (seguro de invalidez y vida, abbreviated as SIV): Employers are assessed a contribution equivalent to 1.75% of each employee’s base contribution salary and employees are assessed a contribution equivalent to 0.625% of their base contribution salary.

Occupational risk insurance (seguro de riesgos de trabajo, abbreviated as SRT): Contribution rates vary among employers based on their risk category, and their rates are annually determined by the IMSS. The minimum occupational risk insurance rate that may be assessed on an employer is 0.5% of each employee’s base contribution salary and the maximum rate that may be assessed is 15% of each employee’s base contribution salary. Employees do not contribute to this fund. An employer’s occupational risk insurance rate assigned to it by the IMSS generally is in effect for the period from March 1 to the last day of February of the next year. The maximum percentage that an employer’s occupational risk insurance rate may increase from one year to the next is 1 percentage point.

Illness and maternity insurance (seguro de enfermedades y maternidad, abbreviated as SEM): There are four types of assessments for funding illness and maternity insurance, with variation among the types regarding contribution rates, whether both employers and employees or only employers are required to pay contributions, and whether the base contribution salary that functions as the general taxable limit for social taxation in Mexico is applicable or whether a different taxable limit is applicable. The four types of illness and maternity insurance assessments are:

fixed-fee (cuota fija) contributions to fund benefits in-kind (prestaciones en especie): each employer is assessed a monthly contribution equivalent to 20.4% multiplied by the monthly unit of measure and update, and further multiplied by the number of employees who worked for the employer during the month;
surplus fee (cuota excedente) contributions to fund benefits in-kind: the taxable amount of wages paid to each employee during a month is the employee’s monthly base contribution salary as capped by the monthly maximum base contribution salary, minus the product of three times the monthly unit of measure and update, with the employer contribution rate of 1.1% and the employee contribution rate of 0.4% applicable to this taxable amount;
contributions to fund cash benefits (prestaciones en dinero): employers are assessed a contribution equivalent to 0.7% of each employee’s base contribution salary and employees are assessed a contribution equivalent to 0.25% of their base contribution salary; and
contributions to fund medical expenses for pensioners and beneficiaries (gastos médicos para pensionados y beneficiarios): employers are assessed a contribution equivalent to 1.05% of each employee’s base contribution salary and employees are assessed a contribution equivalent to 0.375% of their base contribution salary.

Insurance for day-care services and social benefits (seguro de guarderías y prestaciones sociales, abbreviated as SGPS): Employers contribute the equivalent of 1% of each employee’s base contribution salary. Up to 20% of each employer’s contribution may be allocated to social benefits. Employees do not contribute to this fund.

Insurance for retirement, unemployment in advanced age, and old age (seguro de retiro, cesantía en edad avanzada y vejez, abbreviated as SRCV): Employers with employees enrolled in public retirement, elderly unemployment, and aging funds must contribute the equivalent of 3.15% of each employee’s base contribution salary as a contribution for elderly unemployment and old-age insurance funding and 2% of each employee’s base contribution salary as a contribution for a retirement fund. Employees contribute 1.125% of their base contribution salary as a contribution for elderly unemployment and old-age insurance funding.

Contribution to the Institute of the National Housing Fund for Workers (Instituto del Fondo Nacional de la Vivienda para los Trabajadores, abbreviated as INFONAVIT): Employers contribute the equivalent of 5% of each employee’s base contribution salary to INFONAVIT.

Employers may proportionally receive discounts from these social taxes if:

employees miss eight days of work in a two-month period and are not incapacitated;
employees miss fewer than eight days, in which case employers may receive discounts from all social tax obligations except for illness and maternity insurance; or
employees are certified as incapacitated by the IMSS, in which case all social taxes may be discounted except retirement insurance.

Registration: Employers must first register with the RFC before registering themselves and their employees with the IMSS. To register with IMSS, employers must submit a Notice of Employer Registration in the Obligatory Regime through the IMSS website. Upon receipt and review of the notice, the IMSS establishes an appointment time and date at one of the IMSS offices, when and where employers must complete the registration process.

Employers must enroll workers in the IMSS website five business days or eight days, whichever comes first, after their date of hire by presenting Form AFIL-02, Notice of Worker Registration (Aviso de Inscripcion del Trabajador), to the IMSS. Furthermore, employers must keep employee data up to date. Enrolling employees on the IMSS enrolls them in both social security and INFONAVIT.

Taxable Amounts: Payments to all funds except the Illness and Maternity fund are calculated based on the base pay of all workers. Effective since Jan. 1, 2017, salary ranges used to calculate social taxes refer to the UMA instead of the minimum wage. Illness and Maternity fund contributions were based on the minimum wage of Mexico City until Dec. 31, 2016.

Withholding Methods: Employee contributions towards the different types of insurances and pensions should be deducted from employees’ paychecks and be paid the 17th of each month to IMSS. Employees who register for a loan with INFONAVIT should have their bimonthly charges subtracted from their paycheck by their employers.

Returns and Remittance: Employer contributions and employee withholdings for retirement, advanced age and old age must be paid by the 17th of each month to IMSS. Payments to the INFONAVIT should be paid bimonthly by the 17th of the month. If the 17th is a Friday or public holiday, payment is due on Monday or the next business day. The first payment of the year is due Jan. 17th, for taxes incurred over the months of November and December.

Employers with more than five employees are required to utilize the Automatic System of Payments (SUA) in order to pay all social taxes which can be downloaded from IMSS website. The software calculates the amount payable to IMSS and INFONAVIT. The software also produces a CD that must be presented upon payment at an authorized bank. Employees with four or fewer employees must present certificate of determination of fees, contributions and loan payments along with their payment. The certificates are available at banks qualified to accept payments.

Employers with more than 300 employees must have a Certified Public Accountant certify that the employer is complying with IMSS regulations.

Recordkeeping: Employers must keep accounting documents on record for five years after they were emitted.

Penalties: If an employer does not file quarterly reports on social security they can be subject to a fine equal to 20 to 350 times the daily unit of measure and update. Furthermore, companies who fail to pay social security are liable for the insurance of workers who suffer damages normally covered by IMSS. Additionally, in the case of a company who has outsourced or contracted out any part of its workforce to another company who cannot cover its social security obligations, both companies are liable.

Employers who do not make full and timely payments to the INFONAVIT will be subject to fiscal actions, notification costs, surcharges and a fine of 50% of the payment amount omitted.

Other Taxes

Mexico’s national government does not assess any taxes on employment income other than those covered in the Income Taxes and Social Taxes sections of this primer.

State/Jurisdiction Taxes

All 31 of Mexico’s states and the federal district impose a tax on company payrolls, known simply as a payroll tax (impuesto sobre nómina, abbreviated as ISN). The states and federal district considerably vary regarding payroll tax rates and due dates for remitting payroll taxes and reporting data regarding the taxes.

Some states require businesses that pay third-party providers of personnel to engage in withholding for the payroll tax. Businesses that pay a third-party provider of personnel to have personnel perform work in a state with this requirement must withhold the state’s payroll tax rate from the payment to the third-party provider and remit and report that amount to that state by the same payment and reporting due date as is generally applicable for payroll taxes due to the state.

Coverage: Mexican states and the federal district levy payroll taxes on employers. Coverage, rates and other details of the tax vary from state to state.

Typically, states collect payroll taxes on wages and salaries; commissions; seniority premium payments; social security premium payments; employee profit-sharing payments; employer savings-fund participation; bonuses; incentives; advances; and payments made to administrators, commissioners, members of the supervisory or management boards of companies or associations.

States typically do not collect payroll taxes on pensions; retirements; funeral expenses; workers’ union dues; compensation for occupational risks and diseases; employee associations dues; compensation derived from the dismissal or termination of the employment relationship; benefits from the Workers’ Housing Fund; work instruments such as tools and clothing; participation of workers in company profits; food pantries; and educational and sports scholarships for workers.

Rates and Thresholds: Payroll taxes assessed by the states and federal district are payable by employers.

Most of Mexico’s states and the federal district assess a flat payroll tax rate. Campeche, Hidalgo (until 2021), and Sinaloa have progressive payroll taxation.

The following rates are in effect for 2021 unless otherwise indicated.

Aguascalientes: Employers are assessed a flat payroll tax rate of 2.5% on the employment income they pay to employees for work performed in or otherwise attributable to Aguascalientes.

Employers generally must remit to Aguascalientes the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed. Starting in 2020, an annual declaration must be remitted by February.

Employers also generally must submit to Aguascalientes a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Reports and payments may be electronically submitted using Aguascalientes’s online filing and payment portal.

Baja California: Employers are assessed a flat payroll tax rate of 1.8%, plus a surcharge (sobretasa) of 1.2%, on the employment income they pay to employees for work performed in or otherwise attributable to Baja California.

Employers with at least 25 employees generally must remit to Baja California the payroll tax due to the state by the 25th day of the month following the month when employment income was paid upon which the payroll tax was assessed. A report detailing the payroll tax for that period is due at the same time. Employers with fewer than 25 employees generally must remit to Baja California the payroll tax due to the state during a calendar quarter by the 25th day of the month following the reported calendar quarter. A report detailing the payroll tax for that period is due at the same time.

Reports and payments may be electronically submitted using Baja California’s online filing and payment portal.

Baja California Sur: Employers are assessed a flat payroll tax rate of 2.5% on the employment income they pay to employees for work performed in or otherwise attributable to Baja California Sur.

Employers generally must remit to Baja California Sur the payroll tax due to the state by the 15th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Baja California Sur a report detailing the payroll tax assessed on employment income paid during a month by the 15th day following the reported month.

Reports and payments may be electronically submitted using Baja California Sur’s online filing and payment portal.

Campeche: Employers are assessed payroll tax rates ranging from 2% to 3% on the employment income they pay to employees for work performed in or otherwise attributable to Campeche.

Campeche’s payroll tax rates and minimum and maximum amounts of monthly income for each payroll tax bracket are as follows:

Range of Monthly Employment Income Paid for Work in Campeche (Mexican Pesos)	Payroll Tax Rate
Up to Mex$252,625	2%
More than Mex$252,625 and up to Mex$525,752	Mex$5,052.50, plus 2.2% of the monthly employment income paid for work in Campeche in excess of Mex$252,625
More than Mex$525,752 and up to Mex$2,520,124	Mex$11,061.27, plus 2.4% of the monthly employment income paid for work in Campeche in excess of Mex$525,752
More than Mex$2,520,124 and up to Mex$5,207,421	Mex$58,926.18, plus 2.6% of the monthly employment income paid for work in Campeche in excess of Mex$2,520,124
More than Mex$5,207,421 and up to Mex$8,559,929	Mex$128,795.87, plus 2.8% of the monthly employment income paid for work in Campeche in excess of Mex$5,207,421
More than Mex$8,559,929	Mex$222,666.07, plus 3% of the monthly employment income paid for work in Campeche in excess of Mex$8,559,929

Employers must remit to Campeche the payroll tax due to the state by the 20th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also must submit to Campeche a report detailing the payroll tax assessed on employment income paid during a month by the 20th day following the reported month.

Reports and payments may be electronically submitted using Campeche’s online filing and payment portal.

Chiapas: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Chiapas.

Employers generally must remit to Chiapas on a bimonthly basis the payroll tax due to the state. For each two-month period, i.e., January and February, March and April, May and June, July and August, September and October, and November and December, the payroll tax due for that two-month period is due by the 15th day of the following month. Employers generally also must submit to Chiapas an annual report detailing the payroll tax assessed on employment income paid through a declaration made anytime from Jan. 1 through April 30 of the year following the reported year. Declarations must be made even when there are no expenditures until Chiapas notifies the business of cancellation or temporary suspension of activities to the register.

Reports and payments may be electronically submitted using Chiapas’s online filing and payment portal.

Chihuahua: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Chihuahua.

Employers generally must remit to Chihuahua the payroll tax due to the state by the 15th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Chihuahua a report detailing the payroll tax assessed on employment income paid during a month by the 15th day following the reported month.

Reports and payments may be electronically submitted using Chihuahua’s online filing and payment portal

Ciudad de México (Mexico City): Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Ciudad de México.

Employers must remit to Ciudad de México the payroll tax due to the district by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Ciudad de México a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Reports and payments may be electronically submitted using Ciudad de México’s online filing and payment portal.

Coahuila: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Coahuila.

Employers can choose to remit payments to Coahuila either on a monthly basis or annually.

Employers that choose to pay monthly must remit tax due to Coahuila by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed. Along with the monthly payment, employers must submit a report detailing the payroll tax assessed on employment income paid during a month.

Employers with branches in more than one municipality of Coahuila must remit a report in each municipality in which a branch is located.

Employers that choose to pay annually the payroll tax due to the state for the fiscal year, which is Jan. 1 through Dec. 31, must remit by Jan. 31 during the year in which the payroll tax will be assessed. For an employer to qualify for annual payment, the amount of payroll tax that the employer paid to Coahuila in the previous fiscal year must not have exceeded the equivalent of 1,000 times the applicable daily minimum wage. Employers that choose to pay payroll tax to Coahuila on an annual basis may be eligible for a payroll tax rate reduction subject to annual determination by the state.

Any employer that chooses to pay payroll tax in January for the fiscal year that includes that January must indicate on its payroll tax payment form that it is choosing the annual payment option. Employers that paid payroll tax for a fiscal year at the start of that fiscal year also are required in December of that fiscal year to then submit a return that definitively settles the amount of payroll tax due for the fiscal year.

Reports and payments may be electronically submitted using Coahuila’s online filing and payment portal.

Additionally, Coahuila offers employers that hire elderly or disabled workers the following tax incentives:

a 20% reduction in payroll tax rate on compensation paid to such workers when they compose more than 8% and up to 10% of plant employees;
a 25% reduction in payroll tax rate on compensation paid to such workers when they compose more than 10% and up to 14% of plant employees;
a 30% reduction in payroll tax rate on compensation paid to such workers when they compose more than 10% and up to 14% of plant employees; and
a 50% reduction in payroll tax rate on compensation paid to such workers when they compose more than 20% of plant employees.

To take advantage of those tax incentives, an employer must indicate in its tax return the number of elderly persons, disabled persons, or both who actively work and the compensation for each of those workers.

Colima: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Colima.

Employers generally must remit to Colima the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Colima a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Reports and payments may be electronically submitted using Colima’s online filing and payment portal.

Durango: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Durango.

Employers may pay either monthly or, if they qualify, quarterly or annually.

Employers paying monthly must remit to Durango the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

An employer may pay quarterly if the employer’s total payroll tax obligation for the previous year was less than 200 times the unit of measure and update (unidad de medida y actualización, abbreviated as UMA), which Mexico determines annually and is used to calculate penalties, obligations, and payments to the government. Quarterly payments of payroll tax for the fiscal year period from Jan. 1 to Dec. 31 are due on the 17th day of April, July, October, and January of the following year, respectively, following the quarter when employment income was paid upon which the payroll tax was assessed.

Employers may pay payroll tax for an entire fiscal year annually by Jan. 17 of that fiscal year as long as the amount of payroll tax paid to Durango in the immediately preceding fiscal year does not exceed 200 times the daily UMA in force at that time. The corresponding form for that type of submission must be marked “opted for annual payment.”

Employers that pay monthly or quarterly generally must submit to Durango a report detailing the payroll tax assessed on employment income paid by the 17th day following the reported month or quarter upon which the tax was assessed. Employers that pay annually must remit a declaration detailing payroll tax paid to Durango during a fiscal year from Jan. 1 to Dec. 31 by Jan. 17 following the reported fiscal year.

Durango offers an incentive that exempts from the state’s payroll tax any compensation paid to a worker who is at least 45 years old as of the date they were hired, with this exemption applicable for the first four years starting with the year when the qualifying worker was hired.

Reports and payments may be electronically submitted using Durango’s online filing and payment portal.

Estado de México: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Estado de México.

Employers generally must remit to Estado de México the payroll tax due to the state by the 10th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Estado de México a report detailing the payroll tax assessed on employment income paid during a month by the 10th day following the reported month along with payment.

Reports and payments may be electronically submitted using Estado de México’s online filing and payment portal.

Guanajuato: Employers are assessed a flat payroll tax rate of 2.3% on the employment income they pay to employees for work performed in or otherwise attributable to Guanajuato.

Employers generally must remit to Guanajuato the payroll tax due to the state by the 22nd day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Guanajuato a report detailing the payroll tax assessed on employment income paid during a month by the 22nd day following the reported month. An annual declaration detailing payroll tax paid to Guanajuato during a fiscal year from Jan. 1 to Dec. 31 must be submitted by Feb. 28 following the reported fiscal year.

Reports and payments may be electronically submitted using Guanajuato’s online filing and payment portal.

Guerrero: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Guerrero.

Employers generally must remit to Guerrero the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Guerrero a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Reports and payments may be electronically submitted using Guerrero’s online filing and payment portal.

Additionally, Guerrero offers payroll tax incentives for job creation. Companies that from the perspective of Guerrero’s government are sufficiently new or have sufficiently expanded may get a 25% to 80% reduction in the payment of payroll tax on salaries up to five years. Guerrero also offers the following supplemental payroll tax incentives:

5% off the payroll tax for salaries for new or expanded companies if 5% of the workforce is disabled;
5% off the payroll tax for new or expanded companies that have a workforce of which at least 40% of the staff are female;
5% off the payroll tax for companies that employ a workforce comprised of 5% of elderly workers; and
5% off the payroll tax for companies that employ workers who have not previously been employed.

Hidalgo: All employers pay a flat tax of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Hidalgo.

Employers generally must remit to Hidalgo the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Hidalgo a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Reports and payments may be electronically submitted using Hidalgo’s online filing and payment portal.

Jalisco: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Jalisco.

Employers generally must remit to Jalisco the payroll tax due to the state by the 12th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Jalisco a report detailing the payroll tax assessed on employment income paid during a month by the 12th day following the reported month.

Reports and payments may be electronically submitted using Jalisco’s online filing and payment portal.

Michoacán: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Michoacán.

Employers generally must remit to Michoacán the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed. When the 17th day of the month falls on a non-business day, however, monthly payments will be accepted the following day or, according to the federal register, may fall depending on an employer’s registration number up to five days later. If the sixth digit is:

1 or 2, employers may take an additional business day to pay;
3 or 4, employers may take two additional business days to pay;
5 or 6, employers may take three additional business days to pay
7 or 8, employers may take four additional business days to pay; and
9 or 0, employers may take five additional business days to pay.

Employers also generally must submit to Michoacán a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month. They also must file an annual report by March 31 detailing payroll taxes paid to Michoacán for the previous fiscal year. The annual report may follow the same schedule as above when a payment falls due on a non-business day.

Reports and payments may be submitted using Michoacán’s online filing and payment portal.

Morelos: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Morelos.

Employers generally must remit to Morelos the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Morelos a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Reports and payments may be electronically submitted using Morelos’s online filing and payment portal.

Nayarit: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Nayarit.

Employers generally must remit to Nayarit the payroll tax due to the state by the 10th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Nayarit a report detailing the payroll tax assessed on employment income paid during a month by the 10th day following the reported month.

Reports and payments may be submitted using Nayarit’s online filing and payment portal.

Nuevo León: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Nuevo Leo’n.

Employers generally must remit to Nuevo León the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Nuevo León a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Reports and payments may be electronically submitted using Nuevo León’sonline filing and payment portal.

Oaxaca: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Oaxaca.

Employers generally must remit to Oaxaca on a bimonthly basis the payroll tax due to the state. For each two-month period, i.e., January and February, March and April, May and June, July and August, September and October, and November and December, the payroll tax due for that two-month period is due by the 17th day of the following month.

Employers also generally must submit to Oaxaca a report on a bimonthly basis the payroll tax due to the state. For each two-month period, i.e., January and February, March and April, May and June, July and August, September and October, and November and December, the report on payroll tax due for that two-month period is due by the 17th day of the following month.

Reports and payments may be submitted using Oaxaca’s online filing and payment portal.

Puebla: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Puebla.

Employers generally must remit to Puebla the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Puebla a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month along with payment

Reports and payments may be submitted using Puebla’s online filing and payment portal.

A 100% subsidy for payroll tax expenses is available for payroll taxes on compensation paid to workers who are at least 60 years old and collecting old-age pension benefits. A 100% subsidy also is available on compensation paid to first-time workers in new positions.

Quintana Roo: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Quintana Roo.

Employers generally must remit to Quintana Roo the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Quintana Roo two types of reports regarding payroll tax. Employers must submit a monthly report detailing the payroll tax assessed on employment income paid during a month, with the monthly report due by the 17th day following the reported month. Employers must submit an annual report that is due on the last day of February of the year following the reported fiscal year from Jan. 1 to Dec. 31.

Reports and payments may be electronically submitted using Quintana Roo’sonline filing and payment portal.

Querétaro: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Quere’taro.

Employers generally must remit to Querétaro the payroll tax due to the state by the 22nd day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers generally must submit to Querétaro a report detailing the payroll tax assessed on employment income paid during a month by the 22nd day following the reported month. Employers also must submit an annual report that is due by Jan. 31 of the year following the reported fiscal year from Jan. 1 to Dec. 31.

Reports and payments may be electronically submitted usingonline filing and payment portal.

San Luis Potosí: Employers are assessed a flat payroll tax rate of 2.5% on the employment income they pay to employees for work performed in or otherwise attributable to San Luis Potosí.

Employers generally must remit to San Luis Potosí the payroll tax due to the state by the 15th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to San Luis Potosí a report detailing the payroll tax assessed on employment income paid during a month by the 15th day following the reported month.

Reports and payments may be electronically submitted using San Luis Potosís online filing and payment portal.

Sinaloa: Employers are assessed payroll tax rates ranging from 2.4% to 3% on the employment income they pay to employees for work performed in or otherwise attributable to Sinaloa.

Sinaloa’s payroll tax rates and minimum and maximum amounts of monthly income for each payroll tax bracket are as follows:

Range of Monthly Employment Income Paid for Work in Sinaloa (Mexican Pesos)	Payroll Tax Rate
Up to Mex$500,000	2.4%
More than Mex$500,000 and up to Mex$700,000	Mex$12,000 plus 2.6% of the monthly employment income paid for work in Sinaloa in excess of Mex$500,000
More than Mex$700,000 and up to Mex$900,000	Mex$17,200 plus 2.8% of the monthly employment income paid for work in Sinaloa in excess of Mex$700,000
More than Mex$900,000	Mex$22,800 plus 3% of the monthly employment income paid for work in Sinaloa in excess of Mex$900,000

Employers generally must remit to Sinaloa the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Effective since January 2020, payroll tax returns must be filed with Sinaloa on a monthly basis. Effective until December 2019, payroll tax returns needed to be filed with Sinaloa on a bimonthly basis. Employers generally must submit to Sinaloa a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month along with payment.

Reports and payments may be electronically submitted using Sinaloa’s online filing and payment portal.

Sonora: Employers are assessed a flat payroll tax rate of 2% on the employment income they pay to employees for work performed in or otherwise attributable to Sonora.

Employers generally must remit to Sonora the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Sonora a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Reports and payments may be electronically submitted using Sonora’s online filing and payment portal.

Tabasco: Employers are assessed a flat payroll tax rate of 2.5% on the employment income they pay to employees for work performed in or otherwise attributable to Tabasco.

Employers generally must remit to Tabasco the payroll tax due to the state by the 20th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Tabasco a report detailing the payroll tax assessed on employment income paid during a month by the 20th day following the reported month.

Reports and payments may be electronically submitted using Tabasco’s online filing and payment portal.

Tamaulipas: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Tamaulipas.

Employers generally must remit to Tamaulipas the payroll tax due to the state by the 15th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Tamaulipas a report detailing the payroll tax assessed on employment income paid during a month by the 15th day following the reported month along with payment.

Reports and payments may be electronically submitted using Tamaulipas’sonline filing and payment portal.

Tlaxcala: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Tlaxcala.

Employers generally must remit to Tlaxcala the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Tlaxcala a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month.

Tlaxcala offers some employers tax incentives. Qualified employers in business before Jan. 1, 2020, are exempt from 100% of payroll tax generated by jobs added and kept during 2020 as compared with December 2019. Employers must request the exemption. Businesses must submit to the government of Tlaxcala the names, salaries, social security numbers and other details to qualify.

Additionally, employers in fiscal year 2020, which runs from Jan. 1 to Dec. 31, 2020, that hire disabled employees and people at least 60 years old may be exempt from 100% of the payroll tax caused by such employees with qualifying documentation.

Reports and payments may be electronically submitted using Tlaxcala’s online filing and payment portal.

Veracruz: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Veracruz.

Employers generally must remit to Veracruz the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Veracruz a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month. Employers also must submit an annual report detailing payroll tax data for a year during February of the following year.

Reports and payments may be electronically submitted using Veracruz’sonline filing and payment portal.

Yucata’n: Employers are assessed a flat payroll tax rate of 3% on the employment income they pay to employees for work performed in or otherwise attributable to Yucata’n.

Employers generally must remit to Yucata’n the payroll tax due to the state by the 10th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Yucata’n a report detailing the payroll tax assessed on employment income paid during a month by the 10th day following the reported month.

Reports and payments may be electronically submitted using Yucata’n’s online filing and payment portal.

Zacatecas: Employers are assessed a flat payroll tax rate of 2.5% on the employment income they pay to employees for work performed in or otherwise attributable to Zacatecas.

Employers generally must remit to Zacatecas the payroll tax due to the state by the 17th day of the month following the month when employment income was paid upon which the payroll tax was assessed.

Employers also generally must submit to Zacatecas a report detailing the payroll tax assessed on employment income paid during a month by the 17th day following the reported month. Employers that contract payroll services to a third party must report their declarations on a semiannual basis by Feb. 17 and by Aug. 17, with semiannual reports in addition to the monthly reports filed by the third-party provider.

Reports and payments may be electronically submitted using Zacatecas’s online filing and payment portal.

Registration: Regulations on registration are state specific. Many states only require employers to have acquired a federal RFC before they make tax payments.

Taxable Wages: All 31 states and the federal district levy a tax on the total salaries and wages claimed by employers on reports.

Returns and Remittance: The timetable to file with a state’s tax authority, usually its finance department or treasury department, varies among states, although most states require employers to file with the state monthly or quarterly. Filing methods also vary with some states requiring payments at given offices, banks, or online.

Recordkeeping: Records generally should be kept for five years.

Penalties: Penalties regarding late or incomplete payment of payroll tax or filing payroll tax reports vary among the states.

COMPENSATION AND BENEFITS

Compensation and benefits are governed by the Federal Labor Law and the Social Security Law. The Mexican Social Security Institute and the Mexican Housing Authority are responsible for administering these laws. The laws are applicable to all Mexican employees and their employers.

Labor and benefit requirements, such as minimum wage and overtime, and are governed by Mexican law even if an employment contract was signed outside of Mexico.

Employers have an obligation to contribute to private retirement and old age insurance accounts of employees. In addition, profit sharing is required for most employers.

Minimum Wage

Effective since Jan. 1, 2019, Mexico’s national standard minimum wage is applicable to most of the country and a higher minimum wage is in effect for the Northern Border Free Zone (Zona Libre de la Frontera Norte, abbreviated as ZLFN). Effective until Dec. 31, 2018, Mexico had a national standard minimum wage applicable throughout the country.

Effective for 2021, the national standard daily minimum wage is Mex$141.70. Effective for 2020, the national standard daily minimum wage was Mex$123.22.

The Northern Border Free Zone’s boundaries are detailed in a map released by the National Minimum Wage Commission (Comisión Nacional de los Salarios Mínimos; Conasamí). The zone includes the entirety of the state of Baja California and northern parts of the states of Chihuahua, Coahuila, Nuevo León, Sonora, and Tamaulipas.

Effective for 2021, the daily minimum wage for the Northern Border Free Zone is Mex$213.39. Effective for 2020, the daily minimum wage for the Northern Border Free Zone was Mex$185.56.

Separate minimum wages that cover 59 professions and that are higher than the national standard daily minimum wage are established at least once per year by the National Minimum Wage Commission.

Effective for 2021, the profession-specific daily minimum wages exceeding the national standard daily minimum wage range from Mex$142.51 for poultry farm managers to Mex$317.29 for reporters working for daily printed news products. Most profession-specific minimum wages in the Northern Border Free Zone are the same as the standard daily minimum wage, Mex$213.39, except for reporters working for daily printed news products, whose minimum wage is still Mex$317.29. Effective for 2020, the profession-specific daily minimum wages exceeding the national standard daily minimum wage range from Mex$123.92 for poultry farm managers to Mex$260.49 for reporters working for daily printed news products. Most profession-specific minimum wages in the Northern Border Free Zone are the same as the standard daily minimum wage, Mex$185.56, except for reporters working for daily printed news products, whose minimum wage is still Mex$260.49.

The full list of Mexico’s profession daily minimum wages is available from the website of Mexico’s National Minimum Wage Commission.

Overtime

Overtime is limited to three hours per day and cannot be worked more than three times per week. Workers are paid at twice their regular hourly wage for the first nine hours of overtime in a week and at three times their regular wage thereafter. Workers under 16 years old are not permitted to engage in overtime work. Employers must pay double salary to workers who are called in on their day off. Those who work on Sunday receive their regular wages plus an additional 25%.

Hours of Work

The Federal Labor Law sets a regular workday of eight hours and a regular workweek of 48 hours and guarantees employees one day of rest per week with full pay. Most employers adopt a 40 hour workweek. Mexican labor law recognizes three regular work shifts:

the day shift, eight hours long, between 6 a.m. and 8 p.m.;
the night shift, seven hours long, between 8 p.m. and 6 a.m.; and
the swing or “mixed” shift, 7.5 hours long, divided between the day and night shifts.

If more than 3.5 hours of work are performed between 8 p.m. and 6 a.m., a swing shift is considered a night shift. A rest period of at least half an hour during a work shift is required.

Holidays

Workers who are required to work on a legal holiday (día feriado) are entitled to be paid their regular pay for their amount of time they worked on the holiday, plus a premium of double their regular pay for the amount of time they worked on the holiday.

When a national legal holiday occurs on Sunday and an employee is required to work on Sunday, the premium of 25% of regular pay for work performed on Sunday is not factored into calculating the holiday premium and instead, like the holiday premium, is based on regular pay. Therefore, an employee performing work on a Sunday that is a national legal holiday must be paid their regular rate of pay, plus the holiday premium of double their regular rate, plus the Sunday premium of 25% their regular rate.

Employers are required to provide employees with paid leave for the following national legal holidays:

Jan. 1: New Year’s Day (Día de Año Nuevo), celebrating the start of a new Gregorian Calendar year.
Constitution Day (Día de la Constitución), the first Monday in February, commemorating the establishment of Mexico’s Constitutions of 1857 and 1917, both of which were implemented Feb. 5. Effective for 2021, Constitution Day is celebrated Feb. 1, 2021. Effective for 2020, Constitution Day was celebrated Feb. 3, 2020.
Birthday of Benito Juárez (Natalicio de Benito Juárez), the third Monday in March, commemorating the life and work of Mexico’s 26th president, whose actual birthday was March 21. Effective for 2021, the Birthday of Benito Juárez is celebrated March 15, 2021. Effective for 2020, the Birthday of Benito Juárez is celebrated March 16, 2020.
May 1: Labor Day (Día del Trabajo), celebrating workers around the world.
September 16: Mexico’s Independence Day (Día de la Independencia), recognizing the anniversary of a key event, the Cry of Dolores (Grito de Dolores), which occurred on Sept. 16, 1801, and catalyzed Mexico’s war of independence from Spain.
Revolution Day (Día de la Revolución), the third Monday in November, commemorating the start of the Mexican Revolution on Nov. 20, 1910. Effective for 2021, Revolution Day is celebrated Nov. 15, 2021. Effective for 2020, Revolution Day was celebrated Nov. 16, 2020.
Dec. 1 every six years (2018, 2024, 2030, etc.): Presidential Inauguration Day
Dec. 25: Christmas Day (Navidad), celebrating the birth of Jesus Christ and also celebrating togetherness of family and friends.

Employees generally also are entitled to paid leave on federal election days and local election days in the Mexican states where they work.

Leave

Annual/Vacation Leave: After one year of employment with a company, employers must provide employees with six paid annual vacation days, increasing by two days each subsequent year until the entitlement reaches 12 days after the fourth year of service. Thereafter, annual leave increases by two additional days for every five years of employment.

Employees are entitled to a 25% premium above their regular salary for vacation pay. Vacation must be taken within six months following the end of the year in which it was accrued. Employees can elect to take pay in lieu of vacation.

Sick leave: Employees unable to work because of a nonwork-related injury or illness and who have made payments into the social security system for the four weeks before the condition developed are eligible for paid sick leave through the Social Security Institute (Instituto Mexicano del Seguro Social, abbreviated as IMSS). The benefit, which is 60% of an employee’s regular wage, is paid from the fourth day of the illness for up to 52 weeks, which IMSS may extend for another 26 weeks. IMSS pays this benefit in full if the employer is up to date with its payments to IMSS.

Parental leave: Pregnant employees are entitled to six weeks of paid maternity leave prior to giving birth and six weeks after, paid by IMSS. In most cases, mothers may opt to transfer up to four weeks of leave from before the pregnancy to after it (e.g. taking two weeks of leave before the due date of the baby and 10 weeks after baby’s born instead of six weeks before and six weeks after).

If the baby is born with a disability or requires additional medical attention, IMSS may extend the mother’s leave an additional two weeks of leave. Mothers who adopt are entitled to six weeks of paid maternity leave. New fathers are entitled to five days of leave for the birth of a child or adoption of a child.

IMSS provides this benefit to workers and employers who have paid at least 30 weekly social security contributions in the previous 12 months; otherwise, the employer must pay the employee’s salary during maternity leave. When an employee returns to work after maternity leave, she is entitled to two half-hour rest periods a day to feed her baby. Employers can fulfill this obligation by reducing the shifts of eligible female workers by one hour each day.

Wage Payment

Wages must be paid every week to employees in positions of manual labor and every 15 days for all other employees. Salaries must be paid on the work premises. Payment must take place on a working day, either during or immediately after the work day. Wages generally are paid on a Saturday.

Bonuses and Special Benefits

Obligatory Private Retirement and Old Age Insurance Funds

Coverage: Employers are required to contribute to private retirement and old age insurance accounts of employees who did not have a government retirement pension account prior to July 1, 1997 or opted out of the government account and into the private account. These contributions are in lieu of contributions to the federal retirement pension and the federal elderly unemployment and old age insurance. Employees may not have both accounts and employers are only required to contribute to one of the two funds. Employers must transfer all funds from government funds to private funds for all employees who opt out of the government programs.

Employers are required to contribute for all employees on their payroll. Contributions must be made to the IMSS which gives employees choices of retirement fund administrators (AFORES) certified by the National Commission for the Pension System (Comision Nacional del Sistema de Ahorro para el Retiro, CONSAR).

Rate: The rates and thresholds for contribution to private retirement funds are calculated based on a employee’s base contribution salary. More information on taxes to fund social benefits in Mexico is available in the Social Taxes section.

Taxable Wages: Amounts subject to the provision include all employees wages and salaries as stated on company financial statements.

Registration: Employers must register with the IMSS as they would to pay social taxes.

Returns and Remittance: Employers must make monthly payments to the IMSS along with their payment of other social taxes.

Withholding Methods: Employers must withhold mandatory and voluntary employee contributions to the private retirement funds and submit them along with other social security payments to the IMSS.

Recordkeeping: All records must be kept on file for five years.

Penalties: Employers are subject to the same liabilities and penalties as those listed in the federal social security program description.

Profit Sharing

Coverage: Most employees have a constitutional right to a share of the profits of their company if the company during the previous fiscal year had annual income of at least Mex$300,000. Among the eligible employees are:

plant workers, regardless of the number of days worked during the year;
workers hired for a fixed-term who have worked at least 60 days during the year, either continuously or discontinuously; and
former employees who comply with the above requirements and worked for the company during the year.

The following types of workers are not covered by this benefit:

directors, administrators, and general managers of the company;
partners or shareholders of the company;
independent contractors; and
temporary workers who have worked less than 60 days.

The following employers are exempt from participating in profit sharing:

startup companies in their first year of operation;
companies in their first two years of operation engaged in developing a new product;
private welfare institutions recognized by law;
newly created natural resource extraction companies, during the exploratory period;
the IMSS and decentralized public institutions for cultural, welfare or charitable purposes; and
companies whose declared working capital and annual income during the previous fiscal year did not exceed Mex$300,000.

Companies who recently merged, transferred, or changed their company name are not considered startups.

Rate: Employers must distribute 10% of their profits in a given year. The shared profits must be divided into two equal parts: one based on how many days each employee worked during the year, and one based on each employee’s salary.

Payment and Documentation: Employers must issue employees their profit share within 60 days of filing annual income taxes, or within 60 days of when they were obligated to present income taxes. Additionally, employers must supply the legal representatives of their employees with a copy of their income tax returns within 10 days of having filed them.

Christmas Bonus (Aguinaldo): By Dec. 20 of each year, employers are required to pay all employees a Christmas bonus equivalent to 15 days of regular wages. Employees who have worked less than one year receive a prorated bonus.

Termination Pay

Resignation: If an employee resigns, the employer must compensate the employee for unused vacation and pay a prorated portion of the Christmas bonus. If the employee has worked for the employer for 15 or more years, the employee is entitled to an additional sum equivalent to 12 days’ salary for each year of service.

Just Cause Required for Termination: Mexico employs the principle of “job stability,” which requires that employers have grounds for dismissing their employees. Specific behavior that can form the basis for dismissal for just cause includes:

misrepresentation of qualifications for a job,
dishonesty at work,
threats or acts of violence at work,
causing intentional damage to an employer’s property,
causing serious damage to an employer’s property through negligence,
compromising the safety of the workplace,
committing immoral acts at work,
revealing the employer’s trade secrets or other confidential matters,
being absent from work more than three times in a 30-day period without permission or cause,
insubordination,
failure to follow safety procedures,
coming to work drunk or under the influence of nonprescription drugs,
being sentenced to prison, and/or
bullying and acts of sexual harassment.

Employers must obtain an advisory opinion from the Joint Commission for Productivity and Training before terminating initial training or probationary employees. Workers who have worked 20 years or more with an employer may be dismissed only for conduct that is egregious or recurrent. If a worker is not notified in writing of the cause for dismissal, the dismissal is considered unjustified. Failure to dismiss an employee within one month of the event that provided cause for dismissal will invalidate the dismissal.

Workers can challenge a dismissal before the local Conciliation and Arbitration Board, asking either for reinstatement or compensation equal to three months’ salary, pay for back wages from the date of dismissal to the date of the award, 20 days’ pay for every complete year of service and a seniority premium equal to 12 days’ pay for every year of service.

Severance Pay: When an employee suffers a nonwork-related disability that precludes him or her from working, the employee is entitled to a severance payment of one month’s salary plus 12 days’ salary for each year of service. An employee who is dismissed without cause and is not reinstated is entitled to three months’ salary, back pay from the date of dismissal to the date of the award, 20 days’ pay for every year of service with the employer and a seniority premium equal to 12 days’ pay for every year of service.

Recordkeeping

Mexico’s compensation and benefit recordkeeping laws could not be confirmed.

Workers’ Compensation

Workers’ compensation and retirement plans are covered under social taxes .

FOREIGN WORKERS

For tax purposes, nonresidents pay taxes as Mexican citizens except in the case of those working under the maquiladora tax regime.

The following people are considered to be residents in Mexico:

individuals that have their house in Mexico,
individuals obtaining more than 50% of their annual income in Mexico,
individuals whose center of professional activities is located in Mexico, or
people who are Civil servants or Mexican workers, even when the main base of its business is abroad.

Residents in Mexico, despite having foreign nationality, will pay taxes as any other national resident individual in Mexico.

Visas: Non-Mexican citizens seeking to work legally in Mexico must obtain a temporary or permanent resident visa. Specifically foreign nationals must obtain one of the following visas in order to work in Mexico:

Temporary visitor with permission to engage in lucrative activities visa: This visa allows foreign nationals to live and work in Mexico and receive a local salary for up to one year.
Temporary visitor border worker visa: This visa authorizes citizens of countries bordering Mexico to the south to live and work in Mexican border regions for up to one year.
Temporary resident visa: This visa authorizes foreign nationals to live and work in Mexico for up to four years.
Permanent resident visa: This visa authorizes foreign nationals to live and work in Mexico indefinitely.

Employers extending work offers to foreign nationals must register with the National Immigration Institute (INM) and receive and maintain a registration certificate. Additionally, employers must regularly update the INM when their employees change immigration status. Job offers must contain the following information:

nonresident’s name,
nationality,
description of the job to be performed,
compensation,
duration of the job being offered,
address of the workplace, and
joint liability of the offeror.

A working holiday visa scheme is in effect for countries that take part in the Pacific Alliance, including Chile, Colombia and Peru. Since then, bilateral working holiday agreements with Canada, France, Germany, New Zealand, and South Korea also have gone into effect.

Taxes: Income taxes are withheld by employers regardless of nationality and filed with the Mexican Revenue Service (SAT).

For employment income paid to nonresidents, Mexico’s personal federal income tax rates and minimum and maximum amounts of annual income for each tax bracket are as follows:

Range of Annual Income (Mexican Pesos)	Income Tax Rate
Up to Mex$125,900	zero
More than Mex$125,900 and up to Mex$1 million	15%
More than Mex$1 million	30%

Wages/Payments: Any noncitizen working in Mexico is covered under the Federal Labor Agreement (FLL) and subject to the same labor requirements and privileges as Mexican citizens.

The Maquiladora Tax Regime

Mexico provides special tax treatment for businesses that qualify as maquiladoras. Maquiladoras are foreign-owned companies in Mexico that are able to import machinery and materials duty free, export finished products around the world and avoid permanent establishment status for tax purposes. Maquiladoras receive several tax benefits affecting payroll. Specifically, foreign workers working under the maquiladora tax regime are taxed at different rates than foreign workers working under the normal tax regime. However, Mexican law requires that 90% of each Maquiladora’s workforce be Mexican citizens.

Coverage: All nonresidents working at maquiladoras are subject to reduced Mexican Income Taxes and managerial, administrative and executive personnel are exempt from income taxes.

Filing and Withholding: Employers must file and withhold income taxes in the same manner as they normally would, with the following exceptions:

Employees who elect to pay their own taxes to the Mexican tax authorities must make a deposit in a Mexican bank.
Foreign-employers withholding taxes may either remit the taxes to the Mexican tax authorities through a foreign branch of a Mexican bank authorized to accept deposits of Mexican taxes or by remit the tax to the Mexican maquiladora. The maquiladora in turn should remit the tax to the Mexican tax authorities through a Mexican bank.
Nonresidents working in Mexico in the maquiladora industry and employed by the foreign parent company of a maquiladora are generally subject to withholding tax under the terms of Article 2 of the Income Tax Law (Ley del Impuesto Sobre la Renta, abbreviated as LISR).
The amount of additional reduction in a maquiladora’s net taxable income under income tax provisions is equal to half the total amount of wages paid to employees engaged in Maquiladora activities that is not includable in the employees’ taxable income deducted by 3% of the total amount of wages paid to employees engaged in Maquiladora activities that is not includable in the employees’ taxable income.

Registration: Employers must file with the Mexican Ministry of Commerce and Industrial Development (SECOFI) for a license to operate under the Maquiladora program. Upon receipt and review of the application, the SECOFI will coordinate with employers to provide the following:

maquiladora license and import permits,
ID number in the National Registry of the Maquila Registry,
ID number in the Federal Taxpayer Registry,
registration in the Foreign Investment Registry,
registration at the Mexican Ministry of Foreign Relations, and
registration at the Mexican Housing Institute (INFONAVIT).

Before Dec. 31, 2017, employers conducting “shelter maquila” operations under the Industria Manufacturera, Maquiladora y de Servicios de Exportacion (IMMEX) program in Mexico are required to make a decision to either continue existing operations registered as a permanent establishment for tax purposes and pay the corresponding accrued income tax (impuesto sobre la renta) or to continue maquila operations by incorporating a new company, acquiring the existing maquila company, or transferring operations to another maquiladora.

WORKING IN THE UNITED STATES

Foreign workers from Mexico must meet general visa requirements and be certified to be employed in the United States. General visa requirements for the U.S. are included in the separate

Mexican workers are eligible to work in the U.S. under special TN visas, which were created under the North American Free Trade Agreements between Canada, U.S. and Mexico. TN visas are valid for three years and are easier to apply for than other visas and the fees are typically less. Mexican workers must qualify within a profession on the TN professional occupations list in order to be eligible for a TN visa.

Mexican workers are eligible to work in the U.S. under H-2B visas, which cover labor or services of a temporary or seasonal nature in occupations other than agriculture or registered nursing. The number of H-2B visas issued each year is limited by U.S. law.

U.S. employers also must check the names of all new-hires and employees against the Specially Designated Nationals and Blocked Persons List, administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). Because OFAC prohibits financial transactions with individuals on the list, employers cannot employ them and may face fines for failing to comply.

For tax purposes, Mexican citizens are subject to U.S. employment-based taxation on income earned in the U.S. unless they can claim an exemption under certain tax treaty provisions or they work under specific visa types that exempt earnings from taxes. Mexico has both a tax treaty and a social tax totalization agreement with the U.S.

State and local taxation of Mexican workers also can apply, although some states within the U.S. recognize international tax treaties that can eliminate that income tax liability for foreign workers.

The U.S. labor laws apply to all workers employed and providing services in the country.

Work eligibility as an employee is contingent upon Department of Homeland Security and Labor Department approval and the employee receiving a U.S. Social Security number from the Social Security Administration.

Tax Residency: In general, employees working in the U.S. on a temporary basis are considered nonresidents for tax purposes unless they qualify for resident status. Employees can be granted permanent resident status through the so-called green card test or if they meet the substantial presence test under the U.S. tax code. More information on these requirements is in the

Permanent residents are subject to U.S. tax requirements the same as U.S. citizens and are taxed under the U.S. system on their worldwide earnings.

Income Taxes: Generally, nonresidents in the U.S. who are from Mexico and are working in the U.S. are subject to U.S. taxes based on their U.S.-sourced income. Income is taxed differently based on whether it is categorized as wage income or nonwage income, which includes interest and dividends.

A Form W-4, Employee’s Withholding Certificate, must be filed by each employee with their employer. All nonresidents in the U.S. who are from Mexico and are working in the U.S. must claim “single” in Step 1c, regardless of marital status; write “Nonresident Alien” or “NRA” in the space under Step 4c of the form; and may not claim “exempt” in the space under Step 4c.

Nonresident alien employees may adjust withholding using Step 2b or 2c of the Form W-4; certain employees also may be able to use 4a or 4b. Nonresidents in the U.S. who are from Mexico may be able to use Step 3 to claim the child tax credit or the credit for other dependents. More information about Form W-4 requirements for nonresident alien employees is available in the

Although the versions of Form W-4 issued in 2020 or later significantly differ from the versions issued in 2019 or earlier, nonresident employees that filed a valid version of Form W-4 from 2019 or earlier with their employer do not need to file another Form W-4 with the employer unless they need to implement a change for their withholding. On Forms W-4 issued in 2019 or earlier, nonresident alien employees were required to check the “single” box on line 3, regardless of marital status; write “Nonresident Alien” or “NRA” above the dotted line on line 6; and were not permitted to claim “exempt” on line 7 of the form.

A special provision allowed nonresidents from Mexico to use Form W-4 to claim withholding allowances for themselves and a spouse and any dependent children who live with them in the U.S. for some portion of the year.

An additional amount is added to a nonresident alien employee’s wages for calculating federal income tax withholding, with the amount based on pay period frequency and the date of the employee’s most recently filed Form W-4. The table of additional amounts applicable to Forms W-4 from 2020 or later and the table applicable to Forms W-4 issued before 2020 are available in the

Compensation paid to certain residents of Mexico who enter and leave the U.S. at frequent intervals (transportation services, construction, or projects involving boundaries) is not subject to withholding. To qualify for this exemption, Mexican residents must give employers a statement with the employees’ name, address and identification number certifying that the resident:

is not a U.S. citizen or resident;
is a resident of Mexico; and
expects to perform the described duties during the tax year in question.

Nonwage income and self-employed foreign workers can be subject to income tax withholding at a flat rate of 30%.

Under Oct. 2016 IRS release IR-2016-133, Mexican and US taxpayers with maquiladora operations in Mexico will not be exposed to double-taxation if they enter a unilateral advance pricing agreement with the Large Taxpayer Division of Mexico’s Servicio de Administración Tributaria.

Additionally, foreign workers may be taxed differently based on the specific type of visa they hold.

Tax treaties: Mexico and the U.S. have both a tax treaty with provisions addressing host country taxation of the nonresident workers and a social tax totalization agreement. A summary of those benefits is listed in the Tax Treaty Exemption Comparison Chart. To claim the tax treaty benefit, the nonresident must file Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with the employer. Separate requirements apply under the totalization agreement.

Students and apprentices in particular must include a statement with Form 8233 to claim a tax treaty exemption from withholding of tax on compensation for dependent personal services. This statement affirms that the student or apprentice is temporarily in the U.S. for purposes of studying by a university or other recognized educational institution in the U.S. It also must affirm that the individual will receive compensation for services performed in the U.S. No limit is placed on student or apprentice compensation for Mexican citizens.

Examples of the statements necessary to claim a treaty exemption from U.S. taxes are included in Internal Revenue Service Publication 519, (2016) U.S. Tax Guide for Aliens.

Social Taxes: Most foreign workers are subject to paying into the U.S. Social Security system. Foreign nationals who are exempt from paying income tax and who do not have the eligibility to receive a social security number may not be required to pay social taxes. Foreign workers contributing to Social Security for a certain time period may be eligible to receive benefits.

Generally, foreign workers in the U.S. that have specific visas as exchange visitors or students or who are temporarily in the U.S. for agricultural work are not subject to social taxes on income that is obtained from the purpose in which they originally entered the U.S.

Totalization Agreements: Social Security totalization agreements can allow foreign workers and U.S. nationals working abroad to avoid paying into two social security systems while being subjected to losing benefits for their home country system. Under totalization agreements, generally, foreign workers will only pay into one of the social security systems, either the home or the foreign system, but not both. Foreign nationals, utilizing a totalization agreement, also can count years of contributions paid to different social security systems to all of the systems they have contributed to in order to be eligible for benefits in one country.

Mexico and the U.S. have entered into a totalization agreement and a summary of those provisions is included in

Wage Payment: Under certain visas for certain types of employment, employers are required to pay foreign workers the higher of either the prevailing wage or the actual wage that is paid to U.S. workers that have similar skills and qualifications.

There are no particular requirements that employees be paid in U.S. dollars.

TREATY ARRANGEMENTS

Mexico has entered into more than 50 income tax treaties, including an income tax treaty with the United States . Mexico has a totalization agreement with the United States for social tax coverage purposes that has been signed but not yet ratified.

The countries with which Mexico has a bilateral income tax treaty in effect are Argentina, Australia, Austria, Bahrain, Barbados, Belgium, Brazil, Canada, Chile, China, Colombia, Costa Rica, Czech Republic, Denmark, Ecuador, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kuwait, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway, Panama, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russia, Saudi Arabia, Singapore, Slovakia, South Africa, South Korea, Spain, Sweden, Switzerland, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, and Uruguay.

Mexico also has an income tax treaty in effect with the special administrative region of Hong Kong.

Mexico has totalization agreements with more than 20 countries. for social tax purposes. The countries with which Mexico has agreements are Andorra, Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Paraguay, Peru, Portugal, Spain, Uruguay, and Venezuela.

RESOURCES

References in English unless otherwise noted.

General

U.S. State Department: U.S. Relations With Mexico

CIA World Factbook: Mexico

Constitution of the United Mexican States (Spanish)

Currency Details

International Organization for Standardization: Currency Codes - ISO 4217

Unicode Consortium: Currency Symbols

United Nations: United Nations Terminology Database: Mexico

Taxes

Mexico Tax Administration Service (Spanish)

Mexico Institute of the National Housing Fund for Workers (Spanish)

Mexico Ministry of Labor and Social Welfare (Spanish)

Mexican Social Security Institute (Spanish)

U.S. Social Security Administration: Social Security Programs Throughout the World: The Americas, Mexico 2015

Mexico Maquiladora Law (Spanish)

Mexico Social Security Law (Spanish)

Compensation and Benefits

Mexico Federal Office of Labor Defense (Procuraduría Federal de la Defensa del Trabajo; PROFEDET): Know Your Labor Rights (Spanish)

Mexico National Minimum Wage Commission (Spanish)

U.S. Department of State: 2016 Human Rights Report: Mexico

Mexico Federal Labor Law (Spanish)

Foreign Workers

Mexico Immigration Law (Spanish)

Working in the United States

U.S. Department of Labor:

Foreign Labor Certification:
Hiring Foreign Workers

U.S. Internal Revenue Service:

IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens
IRS Publication 15, Circular E, Employer’s Tax Guide
IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
IRS Publication 519, U.S. Tax Guide for Aliens
IRS Publication 901, U.S. Tax Treaties

Treaty Arrangements