Tax Methods

With Global Payroll for Mexico, you can define the method for calculating employees' taxes on the General Parameters page.

The tax methods are:

  • For regular earnings where ISR Art. 113 is applicable, the following tax methods are available:

    • Annual projection method.

    • Semimonthly projected ISR.

    • Without adjustment.

    • Adjustment during the month.

    • Adjustment at the end of the month.

  • Article 112 LISR (Severance pay method).

  • Article 142 RISR (Vacation Premium, Profit Sharing, and Christmas Bonus method).

  • Article 148 RISR (Multiple months payment method).

This topic discusses each tax method.

Annual Projection Method

This method projects the taxable base of the pay period as well as projecting the annual taxable base that will accrue for the employee in the annual form. This projection is calculated using annual tables. Once the annual tax is determined, a factor is calculated that divides the taxable base of the pay period by the annual projected taxable base. To determine the tax for the pay period, the projected annual tax is multiplied by the factor and this is equal to the period tax.

Semimonthly Projected ISR

For employees who are on a semimonthly projected ISR payroll, the system projects their salaries for the next period, taking into account that the projection will be made in every pay period and subtracting the tax retained in the previous periods.

The semimonthly projected tax method applies to all types of employees (hourly and salaried) with a semimonthly pay frequency.

Without Adjustment

Depending on the pay frequency, the system will divide the taxable base by the number of worked days and the result will be multiplied by the Day Factor (defined on the General Parameters page). The result will be the monthly taxable base. Then, the system will calculate the taxes to this monthly taxable base. Immediately after calculating the taxes (Articles 113, 114, and 115), the system divides the resulting tax amounts by the Day Factor and multiply the result by the number of worked days. This result gives us the proportional taxes that correspond to the pay period taxable base.

See General Parameters Page.

Adjustment During the Month

This method works the same way as the Without Adjustment method, but takes into consideration all the accumulated taxable earnings for the month. For example, if your company is running a weekly payroll, and you are currently running payroll for the third week of the month, the system will consider the taxable earnings from the two previously paid periods of the month as well as the current pay period. The same consideration is applied to worked days.

Adjustment at the End of the Month

This method is the same as the Without Adjustment method for all pay periods that are not the final one in a single month. This method is also similar to the Adjustment During the Month method for the pay period that is the final one in a single month.

Article 112 LISR (Severance Pay Method)

The system calculates the tax of one month salary for the employee using the method from Article 113. Once calculated, this tax will be divided by the monthly salary in order to determine a Tax Factor. Then, the severance pay taxable base will be multiplied by this factor in order to determine the Article 112 LISR tax amount.

Article 142 RISR (Vacation Premium, Profit Sharing, and Christmas Bonus Method)

The Article 142 RISR method is calculated in this way:

  1. The taxable base is divided by 365 and multiplied by 30.4 in order to determine a monthly taxable base.

  2. The result of this calculation is added to the regular taxable base of the pay period (the one used for the Article 113 tax method). Then, the system calculates the tax to this new taxable base based on the Article 113 method.

  3. The tax for one month salary for the employee is calculated using the Article 113 method.

  4. The difference between the tax from Step 2 and Step 3 is calculated.

  5. The result from Step 4 is divided by the result from Step 1. This results in the Tax Factor.

  6. The taxable base for Article 142 RISR is multiplied by the Tax Factor calculated in Step 5 in order to determine the tax.

Article 148 RISR (Multiple Months Payment Method)

The Article 148 RISR method is calculated in this way:

  1. The taxable base is divided by the number of days that corresponds to the earnings. For example, a quarterly bonus payment is divided by the number of calendar days in the quarter. The result is multiplied by 30.4 in order to determine a monthly taxable base.

  2. The result from Step 1 is added to the regular taxable base of the pay period (the one used for the Article 113 tax method). Then the system calculates the tax to this new taxable base based on the Article 113 method.

  3. The tax for one monthly salary for the employee is calculated using the Article 113 method.

  4. The difference between the tax in Step 2 and Step 3 is calculated.

  5. The result from Step 4 is divided by the result from Step 1. This results in the Tax Factor.

  6. The taxable base for Article 148 RISR is multiplied by the Tax Factor calculated in Step 5 in order to determine the tax.