Mexico‘s Ministry of Finance and Public Credit (SHCP) took an average of 20 days to refund VAT and IEPS in the first eight months of 2022.

In general, the average resolution time for VAT and IEPS refund requests in the period from January to August 2022, (considering the business days elapsed from the date of receipt to its resolution) is as follows: VAT 20.1 business days and IEPS 19.8 business days.

Specifically, in the case of Large Taxpayers, for those companies with VAT and IEPS certification, refunds are resolved, depending on the type of certification, between 4.03 and 9.50 business days, while for those without such certification the term is around 22.31 business days.

For both taxes, article 22, seventh paragraph of the Federal Tax Code establishes a term of 40 business days to carry out the refunds, in practice, for Large Taxpayers this term is reduced to 22.31 business days on average.

SHCP

Mexico’s federal tax structure includes both direct taxes, mainly in the form of income taxes, and indirect taxes, mainly in the form of Value Added Tax (VAT) and special taxes, such as the Special Tax on Products and Services (IEPS).

According to the SHCP, Mexican VAT is levied at two fixed rates: 8% in the Northern Border Free Trade Zone and 16% for the rest of the country.

In addition, VAT is passed through the manufacturing and distribution chain and is passed on as part of the purchase price to the consumer.

On December 30, 2020, a presidential decree was published extending until 2024 the validity of both the 8% VAT and the tax credit equivalent to one third of the income tax accrued in the Northern Border Free Trade Zone.

On the same day, another presidential decree also extended until 2024 the 8% VAT and the tax credit equivalent to one third of the income tax accrued in certain municipalities of the southern border.

While income is taxed at both the individual and corporate levels, personal income tax is taxed at progressive rates.

Structure

Personal income tax is calculated based on annual income.

According to the Income Tax Law, there are 11 tax brackets.

The four highest personal income tax brackets are: a 30% tax rate applies to individuals with annual income between approximately Ps.393,000 and Ps.750,000, a 32% tax rate applies to individuals with annual income between Ps.750,000 and Ps.1.0 million, a 34% tax rate applies to individuals with annual income between Ps.1.0 and Ps.3.0 million and a 35% tax rate applies to individuals with annual income of more than Ps.3.0 million.

The corporate income tax for 2021 was 30% in accordance with Article 9 of the Income Tax Law.