Doing Business 2020
Mexico
Paying Taxes
This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of
paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was
completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information.
What the indicators measure
Tax payments for a manufacturing company in 2018 (number
per year adjusted for electronic and joint filing and payment)
• Total number of taxes and contributions paid or withheld,
including consumption taxes (value added tax, sales tax or
goods and service tax)
• Method and frequency of filing and payment
Time required to comply with 3 major taxes (hours per year)
• Collecting information, computing tax payable
• Preparing separate tax accounting books, if required
• Completing tax return, filing with agencies
• Arranging payment or withholding
Total tax and contribution rate (% of commercial profits)
• Profit or corporate income tax
• Social contributions, labor taxes paid by employer
• Property and property transfer taxes
• Dividend, capital gains, financial transactions taxes
• Waste collection, vehicle, road and other taxes
Postfiling Index
• Time to comply with VAT refund (hours)
• Time to obtain VAT refund (weeks)
• Time to comply with a corporate income tax correction (hours)
• Time to complete a corporate income tax correction (weeks)
Case study assumptions
Using a case scenario, Doing Business records taxes and mandatory contributions a medium size
company must pay in a year, and measures the administrative burden of paying taxes,
contributions and dealing with postfiling processes. Information is also compiled on frequency of
filing and payments, time taken to comply with tax laws, time taken to comply with the
requirements of postfiling processes and time waiting.
To make data comparable across economies, several assumptions are used:
- TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces
ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the
second year of operation (calendar year 2018). Taxes and mandatory contributions are measured
at all levels of government.
The VAT refund process:
- In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times
income per capita of the economy. Sales are equally spread per month (1,050 times income per
capita divided by 12) and cost of goods sold are equally expensed per month (875 times income
per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred
in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs,
sales and the machine and the tax reporting period is every month. Input VAT will exceed Output
VAT in June 2018.
The corporate income tax audit process:
- An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates,
or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a
corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the
tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax
liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual
tax return, but within the tax assessment period.
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