How are profits calculated in Mexico and when are they paid?

In Mexico, May is a significant month for companies as it marks the deadline for a critical annual obligation: the payment of Employee Profit Sharing (PTU). This requirement applies to businesses across all industries.

What is PTU (Employee Profit Sharing in Spanish)? It is a benefit mandated by Article 123 of the Constitution and Article 120 of the Federal Labor Law. According to the law, all companies that report profits from the previous fiscal year must distribute 10% of those profits to their employees.

Since this is a legal obligation, companies need to understand the basic information needed to calculate the payments and to be aware of the deadlines set by law in Mexico. This article will discuss these two key factors.

When should PTU 2025 be paid?

The distribution of a company's profits is stipulated, according to law, between April 1 and May 30 of each year. However, for individuals who carry out business or professional activities and those subject to the Tax Incorporation Regime, the period extends from May 1 to June 29 of each year.

What is the amount of profit a company should pay?

A company must distribute 10% of the total profits reported during the previous fiscal year to its employees. Therefore, if a company's taxable profit is $1,000,000, the amount it must distribute to its employees is 100,000 Mexican pesos.

How to calculate the distribution of declared profits?

The amount corresponding to the profits to be distributed must be divided into two equal parts, with one part paid to employees based on the number of days they have worked, and the other based on each employee's salary. Following the previous example with a profit of 100,000 Mexican pesos, we present the following calculations for this scenario:

Table to calculate profits according to days worked

Half of the total amount corresponding to profits, which is 50,000 Mexican pesos, must be divided by the total number of days worked by all employees. In our example, 50,000 pesos divided by 310 days equals $161.29 per day. Multiplying this amount by the number of days each employee worked yields the corresponding amount:

Distribution corresponding to the workers' salaries

The remaining half of the amount to be distributed by the company as profits, that is, the remaining 50,000 pesos, is divided among the total annual salaries of the workers.

The result of $50,000 divided by $457,000 is 0.10940,  a value that is multiplied by each employee's annual salary to obtain their corresponding profit-sharing amount.

Thus, each worker is entitled to the sum of both amounts (50% for the days worked and 50% for their salary) as the amount of money they will receive from the company's profits. For example, Worker 1 would be entitled to 32,539 Mexican pesos,  and so on for each worker.

Who is entitled to receive PTU payments?

The Mexican Tax Administration Service (SAT) establishes that all individuals who perform subordinate personal work for a salary for other individuals or legal entities are entitled to share in the employer's profits. However, there are some exceptions:

• Employees who have worked fewer than 60 days in a year.

• Directors, administrators, and managers will not be eligible for distribution.

• Newly created companies are not required to pay taxes on their profits in their first year of operation.

• Companies whose annual income declared for Income Tax is less than $300,000 Mexican pesos do not have to pay profits.

• The Mexican Social Security Institute (IMSS) and decentralized public institutions are exempt from paying profits.

• Companies engaged in extractive industries during the exploration period.

What penalties are in place for failing to pay the PTU?

The Federal Labor Law establishes in Articles 992 and 994 that the fine for failure to pay income tax on time ranges from 250 to 5,000 Units of Measurement and Update (UMA), depending on the case.

The UMA values, valid from February 1, 2025, to January 31, 2026, are as follows: Daily UMA: 113.14 MXN. Monthly UMA: 3,439.46 MXN.

How to improve the company's administrative control?

It's important to have control over a company's administrative activities, such as payroll and transactions related to each employee's salary. To achieve this, it's helpful to have an ERP system that allows for document management and administrative updates.

H&CO can help you with these aspects by implementing the software and providing training in SAP Business One modules, which facilitates actions such as:

• Employee file management

• Payroll type queries

• Definition of departments and cost centers

• Control of leave, sick leave, and absences

• Payroll dispersion for payments to different banks

• Several payroll calculations and settlements

• Control and administration of liabilities

• Vacation period management

• Loan monitoring

• Overtime recording

• Creation and sending of payroll payment stamps.

If you want to enhance your management and make better decisions, contact us to discuss how we can assist you in taking the next step.