Article 140 of the Mexican Federal Income Tax Law.
Individuals must accumulate income received from dividends or profits to their other income. Such individuals may credit, against the tax determined in their annual return, the income tax paid by the company that distributed the dividends or profits, provided that the person making the crediting referred to in this paragraph considers as accruable income, in addition to the dividend or profit received, the amount of income tax paid by such company corresponding to the dividend or profit received and also has the tax receipt and the tax voucher referred to in Section XI of Article 76 of this Law. For these purposes, the tax paid by the company will be determined by applying the rate of Article 9 of this Law to the result of multiplying the dividend or profit received by the factor of 1.4286.
Notwithstanding the provisions of the preceding paragraph, individuals will be subject to an additional 10% tax on dividends or profits distributed by corporations resident in Mexico. The latter will be obliged to withhold the tax when distributing such dividends or profits, and will pay it together with the provisional payment of the corresponding period. The payment made pursuant to this paragraph will be final.
In the cases referred to in Section III of this Article, the tax withheld by the legal entity will be paid no later than the date on which the tax return for the corresponding period is filed or should have been filed.
It is understood that the income is received by the owner of the security and, in the case of corporate shares, by the person who appears as the owner thereof.
For the purposes of this article, the following are also considered as distributed dividends or profits:
- The interest referred to in Articles 85 and 123 of the General Law of Mercantile Corporations and the profit participations paid in favor of bondholders or others, by mercantile corporations resident in Mexico or by national credit corporations.
- Loans to partners or shareholders, except for those that meet the following requirements:
- That they are a normal consequence of the operations of the legal entity.
- That they are agreed for a term of less than one year.
- The agreed interest rate must be equal to or higher than the rate established by the Federal Income Law for the extension of tax credits.
- That these agreed conditions are effectively complied with.
- Expenditures that are not deductible in accordance with this Law and benefit the shareholders of legal entities.
- Omissions of income or purchases not made and improperly recorded.
- The tax profit determined, even presumptively, by the tax authorities.
- The modification to the tax profit derived from the determination of the taxable income and deductions authorized in transactions between related parties, made by such authorities.