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Reduction of monthly tax payments in Mexico

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In a global economic environment in which cash and short term resources are an important objective for most businesses, it is important to be aware of available tax incentives.

In this regard, the Mexican tax law allows taxpayers to reduce monthly income tax payments. You get this benefit by requesting authorisation from the tax administration as from the second semester of the fiscal year, to avoid a potential financial cost of tax payments that may represent favourable balances.

The Mexican Income Tax Law states that taxpayers are required to make advance annual tax payments not later than the 17th day of the month subsequent to the one to which the payment refers.

In Mexico, the calculation of the monthly tax payment is determined, in general terms, by a profit ratio based on the results of the preceding year. Therefore, the monthly income tax payments may be totally dissociated from the year´s taxable income for several reasons, such as lower sales, investment in fixed assets or new projects or just because of cyclical types of businesses.

To claim a reduction, taxpayers’ formal request should be filed anytime from July 1, though no later than a month before the date in which the reduction is intended to apply, and to the extent that the corresponding requisites are fulfilled.

Daysi Ruiz (daysi.ruiz@mx.ey.com), David Vanegas (david.vanegas@mx.ey.com) and Gustavo Gómez (Gustavo.gomez@mx.ey.com)

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