Complete guide: what is ISR and how to calculate it without errors?
Posted: Tue Jan 07, 2025 10:14 am
Income Tax or ISR is a tax applied directly to the profits that a natural person or legal entity obtains during a given period in Mexico. Its objective is to increase tax collection to finance public spending.
When you invoice, collect a payroll receipt or declare your taxes, the famous ISR comes into play , 3 letters that you have surely seen appear on your documents, but... what is the ISR really and why is it paid? If you are still not clear about what it means or how it is calculated, today we will resolve all your doubts!
Get your calculator ready and pull out telegram screening those receipts that still confuse you a bit. Below we explain what ISR is in Mexico .
What is ISR?
You know you have to pay it, but you don't know what ISR is , or what ISR means , right? Well, ISR refers to an acronym that stands for: Income Tax , a tax burden that is imposed on taxpayers according to the amount of profits or income received during a fiscal year or period, in Mexico.
In other words, it is the proportional contribution made to the Tax Administration Service ( SAT ), according to the profits that increase our wealth over a given period of time.
And yes, we speak in plural because the ISR is a tax obligation for all people who earn income in Mexico , although of course, there are some exceptions that we will tell you about later.
In tax terms, unlike VAT for example, ISR is a direct tax that is applied to the income we receive and not to what we consume. In this sense, the greater the profits and income we obtain from economic and commercial activities, the greater the ISR we must pay to the SAT .
What is the ISR for?
Since its creation in 1921, the main objective of the Income Tax (ISR) is to support tax collection by taxpayers to allow the financing of public works and services.
Currently, a large part of the revenue in Mexico comes from the ISR . In fact, at the end of 2023, tax collection reached 4 trillion 517 thousand 730 million Mexican pesos, which represented 705 billion pesos more than in 2022, reported the SAT.
Some of its most important functions are:
Tax collection: provides resources to the State so that it can carry out its functions: health, infrastructure, security, etc.
Tax equity: seeks to ensure that contributions are made according to each person's economic capacity, promoting equity in the distribution of the tax burden.
Economic incentives: through tax deductions and incentives, the ISR can encourage certain economic activities: investment in infrastructure, support for research and development, etc.
Control of the economy: allows the government to regulate the economy through fiscal policies that can influence consumption and investment.
Income tax is essential for the functioning of the State and to ensure that all citizens and businesses contribute to the common good.
When you invoice, collect a payroll receipt or declare your taxes, the famous ISR comes into play , 3 letters that you have surely seen appear on your documents, but... what is the ISR really and why is it paid? If you are still not clear about what it means or how it is calculated, today we will resolve all your doubts!
Get your calculator ready and pull out telegram screening those receipts that still confuse you a bit. Below we explain what ISR is in Mexico .
What is ISR?
You know you have to pay it, but you don't know what ISR is , or what ISR means , right? Well, ISR refers to an acronym that stands for: Income Tax , a tax burden that is imposed on taxpayers according to the amount of profits or income received during a fiscal year or period, in Mexico.
In other words, it is the proportional contribution made to the Tax Administration Service ( SAT ), according to the profits that increase our wealth over a given period of time.
And yes, we speak in plural because the ISR is a tax obligation for all people who earn income in Mexico , although of course, there are some exceptions that we will tell you about later.
In tax terms, unlike VAT for example, ISR is a direct tax that is applied to the income we receive and not to what we consume. In this sense, the greater the profits and income we obtain from economic and commercial activities, the greater the ISR we must pay to the SAT .
What is the ISR for?
Since its creation in 1921, the main objective of the Income Tax (ISR) is to support tax collection by taxpayers to allow the financing of public works and services.
Currently, a large part of the revenue in Mexico comes from the ISR . In fact, at the end of 2023, tax collection reached 4 trillion 517 thousand 730 million Mexican pesos, which represented 705 billion pesos more than in 2022, reported the SAT.
Some of its most important functions are:
Tax collection: provides resources to the State so that it can carry out its functions: health, infrastructure, security, etc.
Tax equity: seeks to ensure that contributions are made according to each person's economic capacity, promoting equity in the distribution of the tax burden.
Economic incentives: through tax deductions and incentives, the ISR can encourage certain economic activities: investment in infrastructure, support for research and development, etc.
Control of the economy: allows the government to regulate the economy through fiscal policies that can influence consumption and investment.
Income tax is essential for the functioning of the State and to ensure that all citizens and businesses contribute to the common good.