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What Are the New Payroll Rules in Mexico for 2017?

In the past, our clients who sent employees on assignment to Mexico have used a payroll system that paid only social security and taxes in the country, with the net pay remaining in the home country payroll.  This was convenient for both the employer and employee, and avoided any currency exchange issues, and allowed for easy home country tax calculation.

That has all changed, and now new Mexican Tax Revenue regulations require that net pay for all employees (including expats) be received in official Mexican banks, and paid in Mexican pesos.  This is something that we are assisting our clients with so that they maintain compliance with Mexican tax and employment laws.

What Must be Included in Net Pay?

Net pay for the purposes of meeting the new law will include salary, cash benefits in kind and hardship allowances.  401k contributions and medical insurance do not have to be included in the Mexican payroll.  What this means is that ‘split payroll’ strategies will not be permitted in Mexico, since the entire net pay must be submitted on the Mexican payroll, and taxes paid accordingly.

Are There Specific Banks that Must be Used in Mexico?

Starting January 1, 2017 employees must have accounts set up in Mexican banks nominated by the government.  If an employee does not have an account in one of those banks, they have to set one up, but this only takes one day to accomplish.

After that, e-payslips have to be submitted to the Mexican Tax Authorities with the bank information and account where the funds are received. The pay must be made in Mexican pesos into a peso account (not a US dollar account or other currency).  Of course, the employee is free to convert the amount to dollars or transfer it to another foreign account.

How is Shield GEO Helping Their Clients with this Change in Mexican Laws?

One of the advantages of the Shield GEO employment service is that we stay current with the employment, tax and immigration rules in every country with foreign assignments. In this case, we are working with our clients to make sure that assigned employees have the right type of account in an approved bank.  Then, our local partner will ensure that the payroll is structured correctly under the new rules.

This does result in some currency exchange calculation if there are fluctuations in the Mexican peso, to make sure that the employee is not being disadvantaged by payment in pesos instead of dollars or other currencies. Shield GEO can help you with the correct deductions, statutory withholding and tax payments, so that your company has a seamless transition when host country laws change.

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