Doing business in Mexico requires understanding not only the market but also the country’s unique fiscal, financial, and governmental framework. Many terms are specific to Mexico and are frequently used by accountants, lawyers, banks, and authorities. This article introduces the most important concepts every foreign individual or investor should know.
1. RFC (Registro Federal de Contribuyentes)
The Tax ID number assigned by the Mexican Tax Authority (SAT). Every individual or company carrying out business in Mexico must have an RFC. It is similar to a Social Security Number or EIN in the U.S.
2. SAT (Servicio de Administración Tributaria)
Mexico’s equivalent of the IRS. The SAT oversees tax collection, electronic invoicing, audits, and customs. Every business and professional must interact with SAT, mainly through its online platform and digital tax mailbox.
3. CFDI (Comprobante Fiscal Digital por Internet)
The electronic invoice system in Mexico. Every transaction must be documented with a CFDI, which includes detailed tax data (buyer, seller, tax ID, payment method, VAT, income tax). Without a CFDI, expenses cannot be deducted.
4. e.firma (Electronic Signature)
A digital certificate issued by SAT, formerly known as FIEL. It is legally binding and required to sign contracts, file taxes, and access many government services.
5. RESICO (Régimen Simplificado de Confianza)
A special tax regime for individuals with business, professional, or rental income up to 3.5 million pesos per year. It applies reduced income tax rates (from 1% to 2.5%), designed to simplify compliance.
6. IVA (Impuesto al Valor Agregado – Value Added Tax)
Mexico’s VAT, generally set at 16%. Certain goods and services are taxed at 0% (exports, some food products, medicines), while others are exempt (education, residential rent). Understanding the difference is key to knowing whether VAT paid is creditable.
7. ISR (Impuesto Sobre la Renta – Income Tax)
The Mexican income tax applied to individuals and companies. Rates vary depending on the type of taxpayer:
- Individuals: progressive rates up to 35%.
- Corporations: flat rate of 30%.
8. IMSS (Instituto Mexicano del Seguro Social)
The Mexican Social Security Institute, responsible for health, pension, and labor-related benefits. Any employer must register workers with IMSS and make contributions.
9. INFONAVIT (Instituto del Fondo Nacional de la Vivienda para los Trabajadores)
A federal institution that manages housing contributions from employers, allowing employees to access low-interest mortgage loans.
10. Municipal Licenses and Permits
To operate a business, local governments require different authorizations such as:
- Operating licenses (Licencia de Funcionamiento)
- Land use permits (Uso de Suelo)
- Health permits (if applicable)
11. Public Registry of Commerce (Registro Público de Comercio – RPC)
The government office where companies, powers of attorney, and major corporate acts are officially registered.
12. Anti-Money Laundering Obligations (PLD/AML)
Certain activities (real estate, high-value transactions, gaming, etc.) are classified as “vulnerable” under Mexican law. Businesses must report such transactions to prevent money laundering.
13. CURP (Clave Única de Registro de Población)
A personal identification code for all residents in Mexico, similar to a national ID number. Required for almost all interactions with government and financial institutions.
14. Banking Requirements
Opening a business bank account in Mexico usually requires:
- Residency card
- RFC
- Proof of address in Mexico
- e.firma
Banks are strictly regulated under CNBV (Comisión Nacional Bancaria y de Valores), Mexico’s financial regulatory authority.
Conclusion
For foreigners, Mexico’s fiscal and governmental framework may initially seem complex. However, knowing these key concepts makes it easier to navigate tax compliance, financial management, and government requirements. Understanding terms like RFC, CFDI, SAT, RESICO, and IMSS will give you confidence and help you avoid costly mistakes when doing business in Mexico.
At CFO Readand, we help international clients translate these technical concepts into practical strategies for compliance, financial planning, and long-term success in Mexico.
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