1. Implementing Payroll for Mexico
  2. Overview of Calculating ISR Tax (Regular) for Mexico

Overview of Calculating ISR Tax (Regular) for Mexico

Oracle Human Resources Cloud Payroll for Mexico supports the computation of ISR Tax (Regular). Here are some components that the ISR tax calculation includes:

  • Payroll Frequency

  • ISR Tax Calculation

  • ISR Subsidy for Employment

  • ISR Tax Withholding

Payroll Frequency

For a payroll run type of Regular, the values from the monthly rate tables are prorated as per the payroll frequency. The monthly rates supplied by the government are applicable for a period of 30.4 days. The average number of days per month is considered to be 30.4 (365/12).

To derive the ISR rates and calculate the tax for any payroll frequency (from the monthly rates table), two factors are calculated and coded into the ISR Tax element fast formula:

  • Up Factor - Use this factor to project the subject earnings to a monthly basis. This helps locate the appropriate range in the monthly rates table and get the applicable Fix Rate and the Percentage Tax Rate.

    Up factor = 30.4/Payroll Frequency Days

  • Down Factor - Use this factor to prorate the tax to the appropriate payroll frequency basis.

    Down Factor = Payroll Frequency Days/30.4

Here are the probable Payroll_Frequency_Days values.

Payroll Period

Number of Payroll Frequency Days

Weekly

7

Ten Days

10

Biweekly

14

Semimonthly

15

Monthly

30.4

ISR Tax Calculation

The monthly ISR rate table has this information:

  • From Value

  • To Value

  • Tax Rate

  • Fixed Rate

ISR Tax is the sum of the Fix Rate plus the Exceeded Amount of Lower Limit multiplied by the rate specified in the last column in tax rates table.

The Exceeded Amount of Lower Limit is the employee's monthly earnings minus the Lower Limit value in the tax rates table.

ISR Subsidy for Employment

Oracle Human Resources Cloud Payroll maintains an ISR Monthly Subsidy Rate table. The table contains the monthly rates for computing the ISR monthly subsidy.

These are the rules for ISR Subsidy for Employment:

  • The total amount of Subsidy for Employment paid in a month can't exceed the maximum amount specified in the Subsidy for Employment rates table.

  • During a payroll run, the Subsidy for Employment components automatically adjusts the amount of subsidy so that it doesn't exceed the monthly cap.

  • The adjustment algorithm prorates the Subsidy for Employment rates based on the number of days in the month. In a weekly payroll frequency scenario, the proration is based on 21 days for the third pay period in the month (7 * 3 = 21). If the Subsidy for Employment paid in the month exceeds the prorated rate, the Subsidy for Employment is adjusted.

  • The Subsidy for Employment adjustment compares the Month-to-Date balance. It ensures that the total amount of Subsidy for Employment paid in a month can't exceed the amount specified in the published table.

  • The Month-to-Date balance is calculated based on the Pay Date.

  • For payroll periods less than a month, the Subsidy for Employment rates are divided by 30.4 and multiplied by the number of days of payroll period.

ISR Tax Withholding

The Tax to Charge from an employee is the calculated ISR Tax minus the ISR Subsidy for Employment.

  • If the Subsidy for Employment is greater than the ISR Tax, then the exceeded amount is paid to the employee. The Tax to Withhold is zero.

  • If the Subsidy for Employment is lesser than the ISR Tax, then the Tax to Charge is the Tax to Withhold amount. The Subsidy for Employment is zero.

You can override these rates and tax amounts, by entering override amounts on the Organization Card or the Employee Tax Card.