Conditions for the deduction of voluntary contributions

March 22, 2022

Rodolfo López has commented on the “MiBolsillo” website the conditions to be met by taxpayers so that their voluntary contributions can be used as a tax deduction tool. 

1. Background

The Mexican pension system allows voluntary contributions periodically to the retirement fund. Thus, the final amount the taxpayer will receive as a retirement pension fund improves on his/her own account. 

It should be noted that such contributions have multiple benefits for the taxpayer. For example, in the case of voluntary contributions, the amount spent may be tax-deductible before the Tax Administration Service (Servicio de Administración Tributaria), even in some cases, generating a credit balance for the contributor. 

2. Applicable conditions

According to López Millan’s article, the conditions to deduct taxes for voluntary contributions are as follows: 

  • The resources must be used at the end of the taxpayer’s working life, i. e., when the taxpayer retires or if he/she is entitled to a pension for permanent disability.  
  • The maximum deductible amount for this concept will be up to 10% of the income accumulated during the fiscal year by the taxpayer. 
  • To be deductible, the contribution may not exceed the equivalent of five times minimum wage. 

3. Penalties for non-compliance

Finally, the commentary also compiles the tax penalties for non-compliance with the stipulated conditions. These are;  

The money from the voluntary contributions cannot be withdrawn until the worker’s working life ends. If the money were withdrawn before, up to 20% of the amount in question may be withheld. 

Source: MiBolsillo 21/03/22