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How Does Payroll Work for Foreign Employees in Mexico?

Hiring foreign employees in Mexico can be a key strategy for expanding businesses. However, managing payroll for these types of workers requires compliance with specific regulations. In this article, we explain everything you need to know to properly manage payroll for foreign employees in Mexico.

1. Requirements for Hiring a Foreigner in Mexico

Before adding a foreign employee to your payroll, certain legal requirements must be met:

  • Work Permit : Foreigners must have a Temporary Resident Visa with permission to work or a Permanent Resident Visa .
  • Registration with the National Migration Institute (INM) : The company must be registered as an employer with the INM.
  • Employment contract : The contract must comply with the Federal Labor Law and stipulate the working conditions.

2. Tax and Social Security Obligations

Foreign employees in Mexico are subject to tax and social security obligations similar to those of Mexican workers.

Taxes

  • Income Tax (ISR) : Applied according to the worker’s income level.
  • VAT and State Taxes : They do not apply directly to payroll, but it is important to consider withholdings depending on the type of contract.

Social security

Foreign employees must be registered in:

  • Mexican Social Security Institute (IMSS) .
  • Retirement Savings System (SAR) .
  • National Workers’ Housing Fund Institute (INFONAVIT) .
 

3. Payroll Calculation for Foreigners

The payroll calculation process for foreign employees is similar to that for domestic workers:

  1. Determine the gross salary agreed in the contract.
  2. Apply tax deductions according to the ISR table.
  3. Calculate employer contributions to IMSS, INFONAVIT and SAR.
  4. Obtain the net salary that the employee will receive.

Calculation Example

A foreign employee with a monthly salary of $50,000 MXN would be subject to:

  • ISR according to the current table.
  • Employer contributions of approximately 30-35% of salary.
  • Withholdings for social security.

4. Key Differences with the National Payroll

Since 2017, it has been mandatory to submit payroll receipts in CFDI (Digital Tax Receipt via the Internet) format. Failure to do so can result in tax penalties.

How to avoid it?

✅ Issue and send payroll receipts in a timely manner.
✅ Ensure they meet SAT requirements.
✅ Keep records of issued receipts.

5. Consequences of Non-Compliance with Regulations

If a company does not comply with regulations for foreign employees, it may face:

  • INM fines for hiring without a work permit.
  • Tax penalties for not correctly withholding income tax.
  • Legal problems due to irregular contracts

Explanatory Video on the Foreign Payroll

En nuestro canal de YouTube, explicamos en detalle cómo gestionar la nómina de empleados extranjeros en México:

Conclusion

Managing the payroll of foreign employees in Mexico requires attention to tax, immigration, and labor regulations. Complying with all requirements guarantees legal hiring and avoids penalties.

If you need help managing your foreign employees’ payroll, contact us and we’ll guide you through the entire process.