Taxation of international executives
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.
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.
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.
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.