Effects on the Income Tax of Business Co-Ownership as an Alternative to Reduce the Tax Burden of Individuals in Mexico

Abstract

In Mexico, an individual who carries out business activities has two options for taxation: the business and professional activities regime or the simplified trust regime. In addition, they have the possibility of choosing to constitute a business co-ownership through a contract, considering the requirements and tax obligations of each tax regime. The present research was developed under the methodology of a case study of an exploratory legal documentary type, with a mixed approach. The objective was to compare the fiscal effects of income tax (ISR) between an individual taxpayer and a co-owned business. Derived from the exploratory analysis of the tax provisions, the results obtained lead to the conclusion that taxation through business co-ownership is an alternative that helps to reduce the ISR tax burden of individuals who carry out business activities. According to their participation in the joint ownership, the taxable income and the authorized deductions are divided. Therefore, there is a real decrease in the taxable base used to calculate and determine the ISR, a positive effect on the taxpayer's finances by reducing the ISR for each co-owner and for the co-ownership, which generates greater cash flow and financial liquidity.