Working in Mexico?
Mexico’s Business World
If You Decide to Be Your Own Boss
In knowledge-based industries above all, special skills are in demand. If you prefer self-employment to an office job within a large corporation, be sure to market your skills and experience carefully. For most Mexicans, self-employment — especially at a young age — is not an option since getting the prerequisite funding is often too difficult.
Once incorporated in Mexico, you need to pay attention to the various rules and regulations. A local accountant can help you with the red tape. This will ensure that you’re in compliance with all regulations without taking too much off your budget. Accountant fees are usually very reasonable and a good investment when starting your own business.
Deciding on Your Business Entity
When doing business in Mexico, keep in mind that most Mexican businesses are not too enthused about dealing with sole traders. In some cases, you may not be able to do business at all without a company to back you up. As mentioned, it is always best to seek legal advice to find the right business entity for you.
The main types of firms used by foreigners are as follows:
- Sociedad de Responsabilidad Limitada (S.R.L. Limited Liability Company)
- Sociedades cooperativas (cooperative associations)
- joint ventures
You need to meet with a Notary Public, who will help you set up your business. Notary Publics are appointed by the Governor of State and hold different legal powers and responsibilities. You are required to submit the necessary paperwork as well as identification and your visa. After you have paid your fees, and the paperwork is in order, you will receive your tax ID number (Registro Federal de Contribuyentes or RCF).
Don’t Forget Registering for Taxation in Mexico
Both businesses and individuals working in Mexico need to register with the Ministry of Finance and Public Credit. The amount of tax you will pay while living and working in Mexico depends largely on your residency status. Taxes you may have to pay include:
- income tax
- value added tax (on income derived from lease of property, for example)
- tax on corporate assets
For more information on taxes in Mexico, please contact the Servicio de Administración Tributaria.
Understanding Income Taxes
As a non-resident alien, your salary at a Mexican corporation will only be subject to a withholding tax, which can be as low as 10%, but frequently is around 25%.
Resident aliens are taxed on their income from outside Mexico in the same manner as Mexican citizens. You can avoid paying double taxes, however, if Mexico has signed a treaty to that effect with the country where you normally pay taxes, thus allowing for double taxation relief on a foreign tax credit system. You must file your tax return in Mexico after the close of the tax year (31 December).
The Not Always Favorable Working Conditions
In Mexico, unions negotiate contracts, wages, and benefits directly with large companies and institutions to agree on a collective minimum wage. As the Mexican labor market is extremely competitive, hourly pay and benefits of Mexican employees are much lower than in, for instance, the US.
Working overtime warrants double pay; as does working on Sundays. However, Mexican employees do not enjoy the same amount of annual vacation as employees in many other countries. After working for one year, you are granted six days of paid vacation. The longer you stay with the company, the more vacation days you will be able to earn.
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