Worldwide Tax Guide 2015 – Determination Of Taxable Income - Tax - Mondaq Mexico - Mondaq Business Briefing - Books and Journals - VLEX 575924246

Worldwide Tax Guide 2015 – Determination Of Taxable Income

Author:Mr Mario Camposllera, Carolina Ramírez and Ricardo Martínez

    Taxable income of companies is computed taking into account all income received less deductions allowed by law. The law mentions certain specific items which are not considered income. These include: capital gains, recognition of the equity method of accounting, revaluation of assets and capital.

    Allowable Deductions

    In general terms, all expenses needed to generate income and recorded pursuant to IFRS may be deducted, except in specific cases where there are certain limits and special rules for deduction.

    Allowable deductions include sales discounts, bad debts, interest paid and losses due to exchange and inflation.

    Non-deductible expenses include taxes, costs of representation, commercial credits, provisions to estimated reserves, etc.

    Investments in certain assets can be deducted in the tax year at a discount, beginning in 2007.

    The new Income Tax Law provides that payments for interest, royalties or technical assistance to a foreign entity that controls or is controlled by the taxpayer, will not be deductible when:

    The entity receiving the payment is considered to be transparent except where the transaction is carried out at market value and its shareholders or partners are then subject to income tax on income through the foreign company; Payment is considered non-existent for tax purposes in the country where the alien is located; The foreign entity receiving the payment does not consider it as taxable income. Nor are deductible payments that are also deductible for a related party resident in Mexico or abroad, unless the related party accumulates income generated by the taxpayer, either in the fiscal year or the following.

    Depreciation And Amortisation

    Deduction for investment in tangible or intangible assets is allowed by the law through the depreciation or amortisation of such assets. Freight and handling, insurance, commissions and fees are allowed in addition to the purchase value of the asset. Depreciation and amortisation are calculated for full months commencing with the month when the asset was purchased and using the straight-line method with no allowance for estimated disposal values.

    As a general rule, all types of assets except land, may be depreciated or amortised for tax purposes. The basic depreciation and amortisation tax rates allowed are as follows:

    Outlays made prior to commencing Operations 10% Industrial buildings and warehouses 5% Machinery and equipment 10% except on...

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