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Mexico - Special considerations for short-term assignments

Special considerations for short-term assignments

Taxation of international executives

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Residency rules Payroll considerations Taxable income Additional considerations

For the purposes of this publication, a short-term assignment is defined as an assignment that lasts for less than one year.

Residency rules

Are there special residency considerations for short-term assignments?

Short-term assignees could be considered non-residents by not establishing a place of abode (home) or in case a place of abode is established but a home is maintained in another country their center of vital interest is not in Mexico. Non-residents could be totally exempt of Mexican income taxes when certain conditions are met or be taxed on lower tax rates on their Mexican-sourced income only. As non-residents, the short-term individual will not be subject to file a Mexican annual income tax return and the tax payments made during the year are considered as definitive or final.

Payroll considerations

Are there special payroll considerations for short-term assignments?

It depends whether or not the short-term assignee will be considered as a non-resident or a resident for Mexican tax purposes. Please refer to the applicable sections.

Taxable income

What income will be taxed during short-term assignments?

It depends on the residence status of the short-term assignee. If a tax resident, then the individual is taxed on his/her worldwide income. If not a resident, then the individual is taxed on Mexican-sourced income.

Additional considerations

Are there any additional considerations that should be considered before initiating a short-term assignment in Mexico?

Consideration on whether or not the salaries will be charged-back to the Mexican entity and the estimated length of the assignment as the individual could be totally exempt for Mexican income taxes when qualifying as non-resident.

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