Under some circumstances, independent professionals can also elect to have their fees treated as salary income, in which case it will be the payer's responsibility to withhold the income tax from the professional's income and remit it to the tax authorities on a monthly basis. Reimbursements of expenses of a spouse or dependants usually represent taxable income to the employee.įees paid to members of the Board of Directors are treated as salary income for income tax purposes. Living expense reimbursements, including housing and rental allowances, are generally taxable as compensation to the employee, even if paid directly to third parties. Travel expenses are subject to certain maximum deductibility limits for domestic and foreign travel and are deductible (and not imputed as income to the employee) only when incurred outside a 50-kilometre radius from the employer’s base. A per diem rate for business travel is treated as a taxable allowance unless supported by third-party receipts for actual travel expenses that are limited to lodging (hotel), meals, and transportation. However, the employer's deductibility of automobile costs and expenses is subject to certain limitations, concerning mainly the maximum value of the vehicle. The use of an employer-provided automobile is usually not considered to represent additional taxable income to the employee. Under no circumstances will the social welfare benefits be taxable if their amount, added to other regular compensation, does not exceed seven times the UMA. However, the exempt amount of general social welfare benefits is limited to the equivalent of one annual UMA (MXN 37,844.). These exclusions are taken into account by the employer when calculating the income tax withholding.įringe benefits, such as social welfare benefits, may be considered as totally or partially exempt income if the employer satisfies certain eligibility requirements (e.g. Income from personal services (earned income) includes salaries, commissions, and allowances of all types, including those for housing, living expenses, education, foreign service, tax reimbursements, and employer profit-sharing distributions.Įmployees are allowed to exclude an amount equal to 30 days' UMA if they receive a year-end bonus (Christmas bonus), 15 days' UMA each if they receive a vacation bonus or participation in the employer's profits, and overtime pay up to five times the daily UMA per week, with certain limitations.
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