1. Implementing Payroll for Mexico
  2. ISR Tax for Mexico

ISR Tax for Mexico

Tax on income or ISR is the federal income tax paid by all residents and corporations in Mexico, and is an employee liability. Mexican employers are required to withhold ISR tax liability from an employee's monthly pay and file it to SAT.

This table lists the ISR tax calculation methods that Oracle Human Resources Cloud Payroll for Mexico supports.

Calculation Method

Description

ISR Tax Regular

ISR tax is calculated using regular tax rules (articles 96 - former article 113). This calculation method is used for standard earnings such as the salary, regular wages, commissions or any other earning with no special ISR rules.

ISR Tax Nonperiodic

ISR tax is calculated using the rules for nonperiodic earnings such as Christmas Bonus, Profit Sharing, Vacation Premium and Dominic Premium.

ISR Tax Severance

This is used only for Severance Pay elements.

The ISR Tax Regular and ISR Tax nonperiodic calculation methods used for an earning is dependent on your answer to the ISR tax calculation applicable to this element question in the element template questionnaire. ISR Tax Severance calculation method is used for elements created with the Severance Pay primary classification.

Payroll Run Type

You can calculate the ISR tax for a month or for a payroll frequency period. This table lists the payroll run types that impact ISR tax calculations.

Payroll Run Type

Description

Regular

ISR tax is calculated using the values from the monthly rates table prorated to the number of days in the payroll period.

Adjust tax based on monthly rates

The monthly rates are used to calculate the ISR tax amount and the monthly Subsidy for Employment.

ISR tax is calculated using the values from the ISR tax rates table.

ISR Taxability Rules

The ISR taxability rules determine how the taxes are applied on the earnings.

You can create and configure earnings elements and their associated objects using the element template. The template prompts you for information that's used to create the necessary payroll objects. The combination of the primary and secondary classification you select, determines the statutory ISR taxability rule to calculate the Subject and Exempt portions of the earnings.

The available options are:

  • Statutory - This is the default option, where the taxability rule formula determines the subject and exempt portions for ISR tax calculation.

  • Full Subject - The entire earnings amount is used for ISR tax calculation.

  • Full Exempt - The entire earnings amount is exempt from ISR tax calculations.

The element generated by the element template has these input values:

  • ISR_Subject

  • ISR_Exempt

These input values store the subject and exempt run results determined by the Fast Formula. They feed the balances for ISR tax calculation and ISR reporting.

The statutory taxability rules are predefined in the payroll application and can be overridden by the input values ISR Taxability and State Taxability.

ISR Rate Tables

Oracle Human Resources Cloud Payroll provides these statutory tables to store the rates used for ISR tax calculation for the current financial year:

  • ISR Tax Monthly Rate

  • ISR Tax Annual Adjustment Rate

  • ISR Monthly Subsidy Rate

Use the Calculation Value Definitions task to review these tables.

The monthly rates are used to calculate the ISR tax amount and the monthly Subsidy for Employment values for any payroll frequency. The annual rates are used to calculate the annual tax adjustment and the periodic adjustment based on annual rates.