Income Tax (ISR) is a federal tax that affects the income of both individuals and businesses. This tax is fundamental for financing public services and works by the government. However, there is the possibility of recovering a portion of what has been paid through annual deductions, as explained by the Government of Mexico.
According to official information, those required to pay ISR are residents in Mexico, foreign residents with a permanent establishment in the country, and foreign residents with income from sources located in Mexican territory.
One way to recover a percentage of ISR is through the annual declaration to the Tax Administration Service (SAT), which applies to those under the salary and wage regime or business and professional activity. In this procedure, deductions can be made for certain expenses, such as medical, dental, hospital, funeral, donations, mortgage interest, tuition, among others.
If there is a personal retirement plan approved by SAT, such as an Afore or a private plan, the contributions made to this plan may be tax-deductible up to a certain limit. This means that such contributions can reduce the taxable base of ISR when making the annual declaration, resulting in a tax benefit for the taxpayer.
To access this ISR deduction, certain requirements must be met, such as keeping investments in an Individual Account for at least 5 years to realize the tax incentive. Additionally, contributions must be made to an authorized retirement plan and can be deducted up to a maximum of 10% of annual income or five annual minimum wages, whichever is less. It is important to submit the annual tax declaration in a timely manner, usually in April of the following fiscal year, and include the necessary documents to support the contributions made. It is worth mentioning that the higher the income level, the higher the percentage of ISR withheld.
