The Tax Administration Service (SAT) applies a tax rate on total income, regardless of whether the income comes from different sources. At the end of the year, all income is summed up, and the corresponding tax is calculated, considering an average of 'spicy', where low taxes equal a mild sauce and high taxes are like a spicier sauce. If not enough was withheld during the year, the difference must be paid.
In the case of salaries, the withheld amount is compared with the total annual income to determine the effective tax rate. Income from fees is compared to soft tacos that barely sting, while other income resembles spicy tacos. The progressive tax table of ISR implies that as income increases, so does the tax rate.
It is important to consider the different types of income and the withholdings made to avoid surprises at the end of the year. Making personal deductions and planning provisional payments helps balance the tax burden and anticipate the fiscal closing. In the case of bank interest, the interest rate and inflation of the year determine whether a balance payable or in favor will be generated.
In the case of income from professional services, the ISR withheld and paid monthly must be calculated in relation to the tax profit to determine the effective tax rate. Proper tax planning and knowledge of the rates applicable to each type of income are key to making sound financial decisions throughout the year.
