Effective 1 January 2019, the minimum salary for the Northern Border Free Zone — a new stimulus zone covering 43 municipalities in six states — is MXN 176.72 per day, while for the rest of Mexico, it is MXN 102.68 per day. Mexico also revalued the inflation indexing benchmark, known as the Measurement and Revaluation Unit (UMA), effective 1 February 2019 (daily UMA – MXN 84.49; monthly UMA – MXN 2,568.50; and annual UMA – MXN 30,822.00).
These changes will impact the following items relating to benefits and tax calculations:
- the amounts paid as benefits derived from the increase in the minimum salary (i.e., pension plans, collective bargaining agreement)
- the minimum and maximum base contribution for purposes of the employer-employee contributions to social security (IMSS) and the housing fund (INFONAVIT)
- the exemption limits for certain benefits included in wages and the associated costs to employers
- the exemption limits applicable to employee benefits (i.e., grocery allowances, savings fund, pension plans, statutory annual bonus, employee profit sharing, seniority premium, vacation premium) for purposes of calculating the income tax
- the income tax exemption limits applicable to severance pay
UMA indexing, the different minimum salaries applicable in the different geographical zones, the increase of certain benefits, and the specific rules issued by different authorities on the tax treatment of certain items are complex matters that impact several tax calculations. Therefore, it is advisable to conduct a detailed analysis to verify that the corresponding values have been properly applied for each specific case.
Baker McKenzie has an interdisciplinary compensation group specializing in labor, social security and tax law issues. We will be happy to assist you to ensure that these reviews have been appropriately implemented by your company.