A Practical Guide to File an Individual Tax Return in Mexico

Practical tips to comply with the Annual Tax Return, an important tax obligation in Mexico.

A Practical Guide to File an Individual Tax Return in Mexico
A Guide to Filing a Annual Individual Tax Return in Mexico. Photo by Kelly Sikkema / Unsplash

It is that time of the year, it is time to file our annual tax return, a tax obligation that must be covered by all taxpayers who have earned income during a fiscal year and that few people understand or wish to do.

Although some people believe that it may be difficult or cumbersome, in reality, it is not so much, since the Tax Administration Service (SAT) offers a friendly platform to do it. Some tips to understand more about the Annual Individual Tax Return in Mexico.

Who and what to do?

All taxpayers who obtain accruable income throughout the fiscal year, including those taxpayers belonging to Chapter I and VI Title IV of the Income Tax Law (LISR) are within the following assumptions:
They had 2 or more employers in the last year.

Their income exceeded 400 thousand pesos in the last year.
They received salaries from companies abroad that are not obligated to make withholdings in Mexico.
Those who obtained income from real interest that exceeded 100,000 pesos.

The Income Tax Return must be made every year, for Individuals in April, since it is also a fiscal year and this is how the Income Tax Law (LISR) indicates it.

How is it done?

It must be filed through the SAT's website in the formats indicated therein, together with the advanced electronic signature of the taxpayer filing the return.

To file it, it is advisable to have an accountant. Without the help of an expert in the subject, mistakes can be made in the return that can cause fines for the taxpayer who incorrectly files the return.

Is this your first tax return?

If this is your first tax return, first of all, it is recommended that throughout the year you keep your accounting records and have the following data and documents at hand:

Total income.
Provisional payments (in case they have been made during the year).
CFDI's of personal deductions.
Income tax withholding receipts.

What can be deducted?

The expenses that can be deducted, for Individuals, from their deductions, in the annual tax return are:

Payments for medical, dental, and professional services in psychology and nutrition.

As well as hospital expenses incurred by the taxpayer for himself, for his spouse, or for the person with whom he lives in cohabitation and for his ascendants or descendants in a straight line.

Funeral expenses to the extent that they do not exceed the general minimum wage of the taxpayer's geographic area raised per year.

The donations that are not onerous or remunerative, satisfy the requirements established in this Law and the general rules established by the SAT for this purpose.

The real interest effectively paid in the fiscal year for mortgage loans for the acquisition of their home contracted with the institutions that are part of the financial system, as long as the total amount of the loans granted for said property does not exceed seven hundred and fifty thousand investment units.

The complementary retirement contributions are made directly to the subaccount of complementary retirement contributions, under the terms of the Law of the Retirement Savings Systems or to the accounts of personal retirement plans, as well as the voluntary contributions made to the subaccount of voluntary contributions.

The amount of the deduction will be up to 10% of the taxpayer's taxable income for the year, without such contributions exceeding the equivalent of five general minimum wages of the taxpayer's geographic area raised per year.

Premiums for medical expense insurance, complementary or independent of the health services provided by public social security institutions, provided that the beneficiary is the taxpayer himself, his spouse or the person with whom he lives in cohabitation, or his ascendants or descendants, in a straight line.

Expenses destined to school transportation of descendants in a straight line when this is compulsory under the terms of the legal provisions of the area where the school is located or when such expenses are included in the tuition for all students.

Payments are made for local income tax on salaries and in general for the rendering of a subordinated personal service provided that the rate of such tax does not exceed 5%.

Payments for education services corresponding to the types of basic and high school education referred to in the General Education Law, made by the taxpayer for himself, for his spouse, or for the person with whom he lives in cohabitation and for his ascendants or his descendants in a straight line.

For information

Not complying with your tax obligations may affect your economy, since the fines for Individuals who do not file their Annual Tax Returns range from 1,400 to 38,730 pesos.