The ISR withheld It is the Income Tax that a moral person (company) withholds from natural persons (individuals who carry out an economic activity). It is a way to guarantee part of the tax payment of some taxpayers, so it is very important to learn how to calculate it.
If you have employees who receive a payroll receipt, or you are a company that pays salaries to freelance professionals, you have surely wondered what is ISR withheldalthough perhaps you are still not so clear what that means and why it is important for your tax records or your .
Before continuing, I recommend you have some documents at hand —for example, pay stubs or invoices—, so that you can easily locate the ISR and follow the step-by-step instructions on how to calculate it.
This will help you to have more clarity about this tax the next time your accounting representative mentions it, and also when dealing with tax issues related to your business, professional or entrepreneurial activity. Let’s get started! 🚀
What is ISR withheld?
The ISR withheld is “a tax that a moral person withholds from a natural person who obtains income from providing an independent professional service or for being a salaried employee or receiving assimilated income”, according to the public accountant Gloria Islas, who advised us for the realization of this article.
Before continuing, it is important that you are clear about some concepts to better understand what is ISR withheld:
- Fiscal retention: This is the amount of a perception that must be ‘withheld’ from a subject as a tax to be paid for the performance of some economic transaction. In other words, it is the money collected by him for each income of a taxpayer through the company that grants him that income.
- Salaried/assimilated income: the first means that he is on the payroll, while the second indicates that the person did temporary work for a company, so he does not receive benefits, does not belong to Social Security and is not required to issue an invoice for his income, but the company does make a withholding and generates a tax stamp as proof.
Who withholds ISR?
The legal persons (companies) are the ones that have the obligation to withhold the ISR. There is no case in which a natural person retains another natural person, or that a natural person retains a legal person.
In this sense, the retainer performs the withholding of the tax (the ISR) when he pays the price of the service (to the natural person) and pays it through a declaration to the corresponding entity, in this case the SAT.
💡Tip: I recommend you read this article on our blog if you want to know.
What is ISR for natural persons?
The ISR to natural persons it means to the tax burden that falls on any individual who carries out activities for which they generate incomewith which it acquires certain rights and obligations.
“Regardless of the activity of the natural person, For the fact of obtaining income from a business or activity, the government collects this ISR tax. It is taxed according to the regime: if you are a natural person with business activity or you are a legal entity of a certain regime, by the fact of obtaining an income you will have the obligation to pay it”, explains the CP Gloria Islas.
Some people can levy this tax for utility and others for the fact of issuing an invoice; and if you are an employee or work as an equivalent, by the fact of receiving an income, a calculation is made on this payment and that is the ISR withheld by the person who pays you for your services.
💡Tip: If you have just started in the adventure of entrepreneurship, business and taxes, it may be good to understand . Check it out in our article.
What happens if I have ISR withheld?
Remember that the ISR withheld is the tax that is ‘applied or withheld’ from your weekly, fortnightly or monthly payments as a workerand that as an independent natural person or legal entity that pays taxes, you are withheld when generating income.
Depending on the regime in which you find yourself as a natural person, this ISR withheld can be recoverable or creditablejust remember that it is very important that you confirm your regimen.
Inside of (LISR), there are several sections on how this tax is withheld for individuals. If you belong to this group and receive income from your professional services or your employment, it is very important that you know this law.
For example, Article 106 of the LISR states that: “Legal entities that receive services from natural persons must withhold 10% of the amount of the payment made to them. and they must provide taxpayers with tax receipt and proof of the withholding, said withholding will have as a reason for provisional payment for the purposes of calculating the ISR of the natural person”.
Can the ISR withheld be recovered?
We have good news:yes you can recover the ISR withheld! Remember that income tax and income tax withheld are practically the same: a tax that is taxed according to your regime for having an income. If, for example, you are a salaried person or receive assimilated income, in your annual return you can recover some of that tax withheld on your payroll.
To do so you need to submit your personal deductions generated in the immediately preceding yearand it is very important that in your annual declaration the result is in favor so that you can request the refund before the SAT.
“In the case of natural persons who provide independent professional services, this withheld tax is creditable to their provisional payments that they present month after month”, details the CP Gloria Islas.
Is the ISR withheld returned?
Effectively, the ISR withheld is returned: every natural person files their annual return in the following fiscal year (month of April) and can recover some of what was withheld from ISR in the immediately preceding fiscal year.
This will depend on your regime and if you are within the new Simplified Trust Regime (RESICO). “If you are a natural person with business and professional activity, and you belong to the RESICO, for paying a minimum ISR during the previous year, the SAT does not give you a refund if you have a favorable result in your annual declaration,” explains CP Gloria Islas .
The RESICO is the new tax regime of the SAT that came into force on January 1, 2022 with the aim of simplifying the payment of Income Tax (ISR) and making it easier for entrepreneurs, individuals and legal entities.
This regime clearly explains that it does not accept personal deductions (medical, hospital, etc.), because under it there is no refund of the balance in favor. But If you are a natural person under the salaried or assimilated regime, you can request a refund of that balance.
As a natural person with business and professional activity, if you have personal deductions and it gives you a credit balance, you can request a refund because you worked for a legal person and this person retained the ISR for providing a service.
Take into account that the ISR withheld is not a credit balance, it is a tax. Depending on the regime in which you find yourself, you may or may not request a refund, if there is a credit in your tax return.
What is ISR withheld on payroll?
The ISR withheld in payroll is when you as a salaried worker You receive income from an employer who hired you and pays you a gross salary, to which ISR is applied, in addition to withholdings and subsidies. On your payslip you will find the breakdown of your payment before and after taxes.
If you’re a responsible adult, you’ve probably already discovered that growing up means paying taxes. 🙈 At the beginning of your working life, you may have noticed that your payment vouchers have a breakdown that, in addition to your income, includes various concepts such as ISR. Welcome to the adult world! 👔💼👗
Remember that the withholding percentage for ISR is not the same for everyone, it goes from 1.9% to 35% per month —it is known as provisional—, and it is measured according to the table of lower and upper limits, included in the .
This table determines a range of profits and applies a corresponding percentage, which amounts to par with the income, that is: the more you earn, the more you contribute to this tax.
How to identify the ISR withheld in the annual declaration?
If you made it this far, you’ve already learned the most important elements of ISR withheld and you can be more clear if you can request your return. Now identifying it in your annual statement will be easier for you. Keep reading so you know how to do it!
If you are a salaried or assimilated worker, the boss presents your payroll at the corresponding time —weekly, fortnightly, monthly—and there is reflected the amount that is being withheld by ISR. This will appear on your annual statement: the data will appear pre-filled and will reflect how much you earned and how much your employer withheld from you.
For natural persons with business activity who provide a professional service to a legal person, the withheld ISR is broken down in the invoice you generate. When making your annual return for the following year (which is filed each April), you must fill in the RFC of the withholding agent (company), how much he paid you and how much he withheld from you for ISR.
How to get the ISR withheld?
Currently there are different digital resources, such as tax calculators, that allow you to do the calculation easily and quickly. Here we will show you the step by step to calculate it manually.
- Define the year you want to calculate.
- Choose the period to calculate ISR.
- Define income or salary received during that period.
- Identifies Fixed Fee and Rate depending on income or salary.
- Calculate the corresponding ISR withheld.
Now that you are clear that the ISR withheld is the one that a moral person (company) withholds from the individual who obtains income from the provision of their professional services, it is time to learn how to calculate it!
1. Define the year you want to calculate
Check the ‘Lower limit’ and ‘Upper limit’ table published by the SAT in its , or for the year you want to calculate, as they vary depending on the applicable tax provisions. If you click on the link, you will find all the available tables at the bottom of the content.
2. Choose the period to calculate ISR
It refers to the period you want to calculate: annual, monthly, fortnightly, ten-yearly, weekly or daily. In this example we will calculate the tax on a monthly basis.
3. Define income or salary received during that period.
Locate the gross monthly salary or your total income in the table under the heading ‘Lower limit’ and ‘Upper limit’. In this case we will use a salary of $10,000 MXN as an example: the ‘Lower limit’ is $9,614.67 MXN, while the ‘Upper limit’ is $11,176.62 MXN.
4. Identify fixed fee and rate depending on income or salary
Locate in your table the ‘Fixed Quota’ and Rate corresponding to your total income range, which in this case is taking into account a…
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