Understanding Employer Tax Obligations in Mexico

For global businesses expanding into Mexico, navigating the local tax and social security landscape is crucial. As an international HR expert, I'll break down the key components of employer contributions, ensuring you have a clear, actionable guide to compliance.

The Unit of Measurement and Update (UMA)

In Mexico, the UMA (Unidad de Medida y Actualización) serves as a benchmark for calculating various government charges, including taxes, social security contributions, and fines. It is updated annually; for 2024, the UMA value is 108.57 Mexican pesos. Note that the UMA is not the minimum wage itself but a reference point used in fiscal calculations.

In-Kind and Monetary Benefits

Mexico's social security system categorizes benefits into two types: in-kind and monetary. In-kind benefits include non-cash provisions like medical services, surgical expenses, and medications. A portion of employer contributions, based on the UMA value, falls under this category. Monetary benefits involve direct cash payments to employees.

Employers are required to make several mandatory contributions, which typically range from 35% to 45.73% of the employee's Salario Base de Cotización (SBC). These include:

Sickness and Maternity Insurance: 21.1%
Disability and Life Insurance: 1.75%
Retirement and Seniority Unemployment Insurance: 5.15% to 13.88%
Daycare and Social Benefits: 1%
Housing Fund (INFONAVIT): 5%
State Payroll Tax: 1% to 3%

These rates are subject to change, so consult official sources or experts like SailGlobal for updates.

Sickness and Maternity Insurance

Managed by the Mexican Social Security Institute (IMSS), this insurance covers medical care and maternity leave. Employers contribute 20.4% of the UMA value for in-kind benefits and 0.7% of the SBC for monetary benefits, totaling 21.1%.

Disability and Life Insurance

This insurance provides coverage for health and life risks, with employers contributing 1.75% of the SBC.

Retirement and Seniority Unemployment Insurance

This consists of two parts: a retirement fund (2% of SBC) and seniority unemployment insurance (3.15% to 11.88% of SBC), resulting in a total employer contribution of 5.15% to 13.88%.

Daycare and Social Benefits

Employers fully fund this benefit at 1% of the SBC to support employees with childcare during work hours.

Housing Fund (INFONAVIT)

Employers contribute 5% of the SBC to the National Housing Fund, which helps employees build savings for housing.

State Payroll Tax

Rates vary by state, generally between 1% and 3% of the SBC.

Employee Tax Responsibilities in Mexico

Employees in Mexico also have tax obligations, which include social security contributions and income tax. Total deductions range from 3.92% to 37% of their SBC, broken down as follows:

Sickness and Maternity Insurance: 0.25%
Disability and Life Insurance: 0.625%
Retirement and Seniority Unemployment Insurance: 1.125%
Income Tax: 1.92% to 35%

Income Tax Rates for 2024

Mexico uses a progressive tax system. Below is the 2024 income tax table:

Annual Income Lower Limit (MXN)	Annual Income Upper Limit (MXN)	Fixed Amount (MXN)	Marginal Rate (%)
0.01	8,952.49	0	1.92
8,952.50	75,984.55	171.88	6.40
75,984.56	133,536.07	4,461.94	10.88
133,536.08	155,229.80	10,723.55	16.00
155,229.81	185,852.57	14,194.54	17.92
185,852.58	374,837.88	19,682.13	21.36
374,837.89	590,795.99	60,049.40	23.52
590,796.00	1,127,926.84	110,842.74	30.00
1,127,926.85	1,503,902.46	271,981.99	32.00
1,503,902.47	4,511,707.37	392,294.17	34.00
4,511,707.38	Above	1,414,947.85	35.00

For instance, an employee earning 200,000 MXN annually would fall into the 21.36% bracket, with calculations based on the fixed amount and marginal rate.

Practical Considerations for Employers

Compliance is key to avoiding penalties. Consider a case where a multinational company failed to account for state payroll tax variations, leading to fines. SailGlobal offers tailored support to ensure seamless adherence to Mexican regulations, from calculating UMA-based contributions to managing INFONAVIT filings. Regularly review rates with local experts to stay compliant.

Mexico Employer and Employee Tax Guide 2024 | SailGlobal Insights