Introduction
The Régimen Simplificado de Confianza (RESICO) for individuals was introduced in Mexico in 2022 as a simplified regime designed to bring more taxpayers into the formal economy. Its appeal lies in the extremely low income tax rates and the ease of compliance compared to other tax regimes.
However, it has raised debates about whether it effectively operates as a “domestic tax haven”, since it creates disproportionate advantages for certain taxpayers when compared with employees and small businesses.
How RESICO for Individuals Works
RESICO for individuals applies to taxpayers earning up to 3.5 million pesos annually. Its key features include:
- Reduced income tax (ISR): rates from 1% to 2.5% on gross income actually collected.
- Cash flow basis: tax is calculated on payments received, not on invoiced amounts.
- Pre-filled tax returns: the SAT (Mexican tax authority) automatically generates returns using electronic invoices (CFDI).
- Simplified compliance: no complex deductions, no coefficients, and minimal calculations.
Why Is It Seen as a “Tax Haven”?
While not a tax haven in the international sense, RESICO PF shares some characteristics that make it a domestic tax haven:
- Minimal tax burden: an employee may pay up to 35% in ISR, while a RESICO professional often pays less than 2%.
- Regressive benefits: high-earning professionals within the 3.5M peso limit—such as doctors, lawyers, consultants, or influencers—end up paying proportionally far less tax than employees or microbusinesses.
- Unfair competition:
- A self-employed professional under RESICO can undercut the prices of a small incorporated business that pays 30% corporate income tax.
- Two businesses with similar revenue may face radically different tax burdens simply due to the chosen regime.
Risks and Distortions
- Income splitting: taxpayers may try to divide revenue among family members or entities to stay under the 3.5M peso cap.
- Advantage over small businesses: while RESICO individuals pay symbolic ISR rates, small incorporated businesses must deal with 30% ISR, profit sharing (PTU), social security contributions, and additional obligations.
- Perceived inequity: employees and small business owners often feel they carry a much heavier burden compared to RESICO taxpayers.
Conclusion
RESICO for individuals has been effective in encouraging formalization of income, but it also functions as a “mini tax haven” inside Mexico, creating unfair advantages compared to other regimes.
The challenge for the Mexican tax system will be to balance the incentives for compliance without turning RESICO into a tool for aggressive tax planning that undermines both equity and competition in the market.
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