Mexico ISR

Federal
Income Tax
Oracle Fusion Human Capital Management for Mexico

WHITE PAPER / MAY 7, 2019

DISCLAIMER
The following is intended to outline our general product direction. It is intended for information
purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any
material, code, or functionality, and should not be relied upon in making purchasing decisions. The
development, release, and timing of any features or functionality described for Oracle’s products
remains at the sole discretion of Oracle.

DISCLAIMERS FOR PRE-RELEASE, PRE-GA PRODUCTS

The revenue recognition disclaimer on this page is required for any white paper that
addresses future functionality or for products that are not yet generally available (GA). If you
are unsure whether your white paper needs the disclaimer, read the revenue recognition policy.
If you have further questions about your content and the disclaimer requirements, e-mail
[email protected]. If you do not need the disclaimer, you may delete it and the page that it
appears. First, display hidden characters by clicking on the Paragraph icon on the Home toolbar. It is
a small, square icon that appears to the left of the Quick Style Gallery. Then, highlight all the text on
this page and press the Delete key. Notice that there is a section break displayed as a double-dotted
line at the bottom of this page. Continue to press Delete until the page disappears and your cursor is
on the Table of Contents page. Be sure not to remove the section break, or the formatting of the title
page will be incorrect. Delete this note before publishing.

The testing disclaimer in the TM block on the last page (highlighted in yellow) is provided by the
FCC. It must appear in the TM block for all pre-release, pre-GA products. Be sure to remove the
yellow highlighting before publishing. When the product becomes GA, update your collateral by
removing the disclaimer from the TM block. If your product is already GA, delete the disclaimer from
the TM block.

Important: If your product is not GA, then you cannot include any regulatory compliance information
in the white paper. Regulatory compliance information may be included for GA products only if you
have completed all required safety and emissions testing, and you have received the certificates
issued by the testing organization.

2 W HITE PAPER / Mexico ISR Federal Income Tax

Table of Contents

Introduction .................................................................................................. 6

Document Updates ...................................................................................... 6

Comments and Suggestions ........................................................................ 6

ISR Tax........................................................................................................ 7

Legal Entity .................................................................................................. 7

Person ......................................................................................................... 8

Value Definitions .......................................................................................... 8

Employee ISR Tax Information group .......................................................................................... 9

Employer ISR Tax Information group .......................................................................................... 9

ISR Tax Rates Group .................................................................................................................10

MX_ISR_TAX_RULE group........................................................................................................10

Calculation Cards ...................................................................................... 12

Organization Cards .....................................................................................................................12

Personal Cards ...........................................................................................................................14

Associations ...............................................................................................................................15

Elements.................................................................................................... 16

Element Classifications ..............................................................................................................16

3 W HITE PAPER / Mexico ISR Federal Income Tax

 Element Template ......................................................................................................................18

Input Values................................................................................................................................20

Subclassification Rules ...............................................................................................................21

Element Creation Example .........................................................................................................22

ISR TAX CALCULATION ........................................................................... 24

Regular Earnings ........................................................................................................................24

Nonperiodic Earnings .................................................................................................................24

Severance Earnings ...................................................................................................................25

Subsidy for Employment.............................................................................................................25

Monthly Salary Calculation for ISR Tax ......................................................................................25

Taxability Rules ..........................................................................................................................26

ISR Tax Rates ............................................................................................................................27

Payroll Frequencies ....................................................................................................................27

Payroll Run Types ......................................................................................................................27

ISR Elements ............................................................................................. 27

Run Results ................................................................................................................................28

Balances .....................................................................................................................................29

Statement of Earnings ................................................................................................................30

HOW TO SETUP ....................................................................................... 32

HOW TO USE............................................................................................ 32

4 W HITE PAPER / Mexico ISR Federal Income Tax

RESOURCES ............................................................................................ 32

5 W HITE PAPER / Mexico ISR Federal Income Tax

INTRODUCTION

This document identifies and describes the setup tasks for Oracle Fusion Human Capital Management
for Mexico. It is intended to support the implementation team in understanding how to:

 Define and setup Mexico Federal Income Tax (ISR) tax components.

 Define and setup the ISR tax Calculation, its rules and processing types.

This documentation can also be beneficial to end users who run application processes after
implementation.

Note: This document should not be considered a comprehensive guide for Payroll implementations.
The focus of this document is Mexico specific processes and information. For information about
generic tasks, the implementation team should refer to guides listed in the Resources section.

DOCUMENT UPDATES

This document is based on the most current application release as of the document’s publication date.
Content is updated as needed only to reflect major changes to existing features or when significant
new features are added to MX localization. For this reason, it is possible that some minor UI
differences may exist between the version being implemented and the version described in this
document.

Change Record Date Description of Change

April 2019 Created document.

COMMENTS AND SUGGESTIONS

Your comments are important to us. We encourage feedback about Oracle Fusion Applications Help
and guides.

Please send your suggestions to: [email protected].

You may also use the Send Feedback to Oracle link in the footer of Oracle Fusion Applications Help.

6 W HITE PAPER / Mexico ISR Federal Income Tax

ISR TAX
“Impuesto Sobre la Renta” (ISR) is the Mexico federal tax on income and is an employee liability.

Employers have the obligation to withhold it every payroll run and file it to government agency
“Sistema de Administración Tributaria” (SAT) every month.

ISR can also be an annual tax and at the end of the fiscal year, the employers must report the annual
earnings and the total tax withheld.

Oracle delivers multiple components at different levels to support ISR Tax calculation and reporting.

LEGAL ENTITY
The following Legal Entity attributes are delivered to support the Mexico ISR Tax.

FIELD DESCRIPTION

RFC Registro Federal de Contribuyente (RFC) is the employer Federal Contributor

Identifier for tax reporting.

Payroll Statutory Unit A payroll statutory unit (PSU) is a legal entity that is responsible for paying
workers, including the payment of ISR tax and social insurance liabilities.

Legal Employer A legal employer is a legal entity that employs workers.

It is important to mark the Legal Entity as a Payroll Statutory Unit and Legal Employer for ISR tax
purposes.

Navigation:

Workforce Deployment > Define Common Applications Configuration for Human Capital Management
> Define Enterprise Structures for Human Capital Management > Define Legal Entities for Human
Capital Management > Define Legal Entity for HCM Information.

For more information about legal entities, refer to the Legal Entities chapter, Oracle Fusion Human
Capital Management for Mexico.

https://support.oracle.com/epmos/faces/DocumentDisplay?id=2175160.1

7 W HITE PAPER / Mexico ISR Federal Income Tax

PERSON
The following person National Identifier is delivered for ISR Tax reporting.

FIELD DESCRIPTION

RFC “Registro Federal de Contribuyente” (RFC) is the employee Federal Contributor

Identifier for tax reporting.

For more information, refer to National Identifier chapter, Oracle Fusion Human Capital Management
(Mexico): National Identifier Validation.

https://support.oracle.com/epmos/faces/DocumentDisplay?id=2116899.1

VALUE DEFINITIONS
A calculation value definition specifies how a value is provided or calculated. The value is not
necessarily monetary. Typically, it is a flat amount or rate, but it could be a date or a text value, such
as a tax code, depending on the calculation type. Some definitions hold the values in a table, so that
different values apply to different employees.

Value definitions are organized by groups to categorize related calculation values.

8 W HITE PAPER / Mexico ISR Federal Income Tax

You cannot edit predefined calculation value definitions, but it is possible to override values based on
effective dates.

Mexico localization delivers the following value definitions to support ISR tax calculation:

Employee ISR Tax Information group

This group includes value definitions to manage special taxation processing for the employee.

VALUE DEFINITION DESCRIPTION

Pay Subsidy For Subsidy for Employment (SE) is computed as part of the ISR tax calculation for
Employment Regular Earnings.
When an employee has more than one employer, he/she has to opt whom is
going to pay the SE and notify employers.
Payroll professional can choose whether to calculate the SE for the assignment
or not.
Default value for this value definition is ‘Yes’ , If the value is ‘No’ then the
application doesn’t calculate SE.

Employer ISR Tax Information group

This group includes value definitions to manage special ISR Tax, State Tax and Social Security
special processing for the employer.

VALUE DEFINITION DESCRIPTION

Average Days Per Month Average used to compute Monthly Ordinary Salary, Tax proration, Adjustments,
etc.
This value depends on employer practice.
The application uses the natural days of the month as default value, if no value is
entered in this definition.

9 W HITE PAPER / Mexico ISR Federal Income Tax

 Average Days Per Year Average used to compute annual tax adjustments and seniority for taxation. This
value depends on employer practice.

If this value definition has no value then the application uses the following:
 The value of 364 for weekly and biweekly payroll frequencies.
 The value 360 for any payroll frequency different than those described in
previous point.

ISR Tax Rates Group

This group includes the ISR tax table tables and Comprobante Fiscal Digital por Internet (CFDI) caps.

VALUE DEFINITION DESCRIPTION

ISR Annual Adjustment Annual ISR tax rates according to ISR Tax Law Article 152.

ISR Monthly Subsidy Monthly Subsidy for Employment rates according to ISR Tax Law Transitory
Rate Article 10.

ISR Monthly Tax Rate Monthly ISR tax rates according to ISR Tax Law Article 96.

MX_ISR_TAX_RULE group
This group includes the components used by the ISR taxability rules, Minimum Wage and Unit of
Measure and Update (UMA) value definitions.

VALUE DEFINITION DESCRIPTION

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Christmas Bonus
Rule Exempt Factor for secondary classification.
Christmas Bonus

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Dominical Premium
Rule Exempt Factor for secondary classification.
Dominical Premium

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Employer
Rule Exempt Factor for Contribution to Savings Fund secondary classification.
Employer Contribution to
Savings Fund

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Holiday Worked
Rule Exempt Factor for secondary classification.
Holiday Worked

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Overtime secondary
Rule Exempt Factor for classification.
Overtime

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Profit Sharing
Rule Exempt Factor for secondary classification.
Profit Sharing

10 W HITE PAPER / Mexico ISR Federal Income Tax

 Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Severance primary
Rule Exempt Factor for classification.
Severance

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for primary
Rule Exempt Factor for classification Supplement Earnings and secondary classification Social Foresight
Supplemental Social Earnings.
Foresight Earnings

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Vacation Premium
Rule Exempt Factor for secondary classification.
Vacation Premium

Mexico ISR Taxability Taxability rule for all classifications with full exempt.
Rule Exempt Factor for all
classifications with full
exempt

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Employer
Rule High Range Factor Contribution to Savings Fund secondary classification.
for Employer Contribution
to Savings Fund

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Holiday Worked
Rule High Range Factor secondary classification.
for Holiday Worked

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Overtime secondary
Rule High Range Factor classification.
for Overtime

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Christmas Bonus
Rule Low Range Factor secondary classification.
for Christmas Bonus

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Dominical Premium
Rule Low Range Factor secondary classification.
for Dominical Premium

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Employer
Rule Low Range Factor Contribution to Savings Fund secondary classification.
for Employer Contribution
to Savings Fund

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Holiday Worked
Rule Low Range Factor secondary classification.
for Holiday Worked

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Overtime secondary
Rule Low Range Factor classification.
for Overtime

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Profit Sharing
Rule Low Range Factor secondary classification.
for Profit Sharing

11 W HITE PAPER / Mexico ISR Federal Income Tax

 Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Severance primary
Rule Low Range Factor classification.
for Severance

Mexico ISR Taxability Taxability rule component to compute ISR tax exemption for Vacation Premium
Rule Low Range Factor secondary classification.
for Vacation Premium

Mexico Unit of Measure Mexico Unit of Measure and Update (UMA) value definition
and Update

CALCULATION CARDS
Calculation cards capture values required for payroll calculation. Each calculation card has one or
more components, and each component may have one or more sets of component details.

Calculation cards can be defined at employee, PSU or TRU levels. Use the cards to capture
information specific to a person or organization, such as an employee's tax filing status or an
employer's tax identification number. Calculation card entries override default values defined at other
levels. The priority of information, from highest to lowest, is as follows:

 Personal calculation card (payroll relationship level)

 Tax reporting unit calculation card
 Payroll statutory unit calculation card
 Calculation value definitions (legislative data group level)

Component details are not applicable for Mexico. All data, which needs to be defined, is in calculation
values.

Organization Cards
Mexico localization delivers organization cards at PSU and TRU levels with the following components:

COMPONENT GROUP CALCULATION COMPONENT

Loans Employer INFONAVIT

Regional Employer State Tax

12 W HITE PAPER / Mexico ISR Federal Income Tax

 Social Security Employer Social Security

Taxes Employer ISR Tax

For ISR tax purposes, “Employer ISR Tax” calculation component allows overrides for “Employer ISR
Tax Information” value definition group described in previous section.

Organization cards must be accessed from an Implementation Project.

Go To Navigator > Setup And Maintenance > Manage Implementation Projects > Select a Mexico
Project.

 In the Search field, type “manage legal”, choose Manage Legal Entity Calculation Cards (PSU) or
Manage Legal Reporting Unit Calculation Cards (TRU).

 Verify your scope is set correctly to your Legal Entity.

 Select Component Group Taxes and create Employer ISR Tax calculation component.

13 W HITE PAPER / Mexico ISR Federal Income Tax

 Select the “Enterable Calculation Values on Calculation Cards” tab and click the plus icon.

Personal Cards
Personal payroll calculation cards capture information specific to a particular payroll relationship.
Payroll runs use this information to calculate earnings and deductions.

Component details are not applicable for Mexico. All data, which needs to be defined, is in the
calculation values.

Employee Tax Card delivers the following Calculation Components:

COMPONENT GROUP CALCULATION COMPONENT

Loans Employee INFONAVIT

Social Security Employee Social Security

Taxes Employee ISR Tax

Employee Taxation

14 W HITE PAPER / Mexico ISR Federal Income Tax

For ISR tax purposes, the “Employee ISR Tax” calculation component allows overrides for “Employee
ISR Tax Information” value definition group described in previous section.

To view and manage calculation cards use the Manage Calculation Cards task in the Payroll
Administration or Payroll Calculation work area.

Associations
It is mandatory that an employee is associated to a TRU to be able to compute Mexico taxation (ISR
Tax, Social Security liabilities and Employer State tax).

TRU association and association details for the employee are created automatically when the TRU is
selected during the hire process. If the TRU is not entered, the TRU association must be created
manually in the Employee Tax Card.

The TRU association creates the “Employee Taxation” calculation component and it creates the
“Mexico Taxation” element entry.

Mexico Taxation element triggers all the elements and components needed to compute Mexico taxes.
This means that there is no need to create additional element entries for this purpose.

Mexico Taxation component is the Calculation Break Down for payroll processing.

Associate card components to assignment.

15 W HITE PAPER / Mexico ISR Federal Income Tax

ELEMENTS
Elements are components used in the calculation of an employee’s pay. An element generally
represents a worker’s earnings or deductions.

Element Classifications
Oracle Fusion Payroll provides a suite of predefined element classifications for use when defining
earnings and deduction elements for Mexico.

Primary classifications are defined to meet legislative requirements and hence you cannot change
them. Secondary classifications are subsets of the primary classifications and are used to manage
taxability rules for ISR and State tax calculations.

Use the Manage Elements task from the Payroll Calculation work area to create elements. The
primary classifications and the associated secondary classifications applicable for Mexico are as
follows:

 Absences

– Maternity

– Other

– Sickness

– Vacation

 Direct Payments

– Expense Reimbursement

– Loans and Advanced Payments

– Miscellaneous

 Information

– Basic

– Provisions

– Social Security

 Involuntary Deductions

– Support Child

 Pretax Deductions

– Child Assistance

– Retirement Fund Employee Contribution

 Severance Pay

– Indemnities

16 W HITE PAPER / Mexico ISR Federal Income Tax

 – Seniority Premium

 Standard Earnings

– Regular

 Supplemental Earnings

– Attendance and Punctuality Incentives

– Birth Assistance

– Christmas Bonus

– Deceased Employee Family Assistance

– Dominical Premium

– Educational Assistance

– Glasses Assistance

– Healthcare Reimbursement

– Holiday Worked

– Incentives, Awards, and Prizes

– Labor Risk or Sick Indemnity

– Marriage Assistance

– Meals Assistance

– Moving Assistance

– Other Overtime

– Overtime

– Pantry Allowance in Cash

– Profit Sharing

– Rent Assistance

– Savings Fund Employer Contribution

– Savings Fund Interest and Settlement

– Scholarship for Children of Workers

– Scholarship for Workers

– Social Foresight

– Transportation Assistance

– Union Quota Paid by Employer

17 W HITE PAPER / Mexico ISR Federal Income Tax

 – Vacation Premium

– Worker Social Security Quota Paid by Employer

 Taxable Benefits

– Fuel Coupons

– Pantry Coupons

– Pantry in Kind

– Restaurant Coupons

– Retirement Fund Employer Contribution

– Uniform Coupons

 Voluntary Deductions

– In Favor of Employee

– In Favor of Third Parties

– In Favor of Employer

Element Template
The application provides an intuitive user interface known as Element Template that can easily create
elements and the associated objects such as input values, balances, and formulas that are required to
process the element in a payroll run.

The element template displayed by the application will depend on the primary classification and/or
secondary classification selected by the user.

Templates also have various rules associated with it, which will be used by the user to create data that
is required to them. The template engine would get the values for the rules from the template wizard
and process the seeded template structure to create appropriate required by the user.

When an earning, deduction or other element is created, the following components will be generated:

 Elements

 Input Values

 Fast Formulas

 Formula Result Rules

 Balances and Defined Balances

 Balance Feeds

 Status Processing Rules

Depending on the element nature, different types of templates will be used.

The Earnings Template supports creation of elements with the following Earnings classifications:

18 W HITE PAPER / Mexico ISR Federal Income Tax

 Standard Earnings

 Supplemental Earnings

 Direct Payments

 Taxable Benefits

 Severance

The following deductions template are available:

 Pre-Statutory Deductions template

 Voluntary Deductions template

 Employer Taxes, Employer Charges and Employee Tax Credit template

Basic Template

 The basic template creates Information and Balance initialization elements.

 This template does not create a formula.

The template creates an element based on the primary classification and/or secondary classification
selected by the user.

Mexico localization has added some new template rules to meet ISR tax requirements.

 ISR tax calculation applicable to this element?

This rule determines the ISR tax calculation type.

19 W HITE PAPER / Mexico ISR Federal Income Tax

 Regular means this earning does the normal ISR Taxation based on ISR Tax Law Article 96.

 Nonperiodic means the tax will be computed based on the ISR Tax Code Article 174 (Example:
Christmas Bonus)

There is a Mexico dependency for this rule. See the source rule.

 If you select Rule value one (Process and pay with other earnings), only Regular displays on the
detail screen.

 If you select Rule two or Rule three, (Process separately, but pay with other earnings or Process
Separately and pay separately) the two rule choices display on the additional details screen
Regular and Nonperiodic.

 Is ISR taxability rule applicable to this element?

 Statutory (Default): Taxability rule will be applied according ISR Tax Law Article 93

 Full Subject: Full earning amount will be subject

 Full Exempt: Full earning amount will be exempt

The Element Template will create a Base Element (<BASE NAME>) for Standard Earnings,
Supplemental Earnings and Severance primary classifications.

In addition to the base element, three Auto Indirect elements will be created:

 Calculation Element (<BASE NAME> Earnings Calculator)

 Distribution Element (<BASE NAME> Earnings Distributor)

 Results Element (<BASE NAME> Earnings Results)

Input Values
An element's input values define the entry values available on each entry of the element. Each input
value has a unit of measure, such as money or date. Input values can include validations and
conditions to control the data entry of the element entry assigned to a person.

For ISR Tax purposes, the following input values are generated as result of the element creation:

20 W HITE PAPER / Mexico ISR Federal Income Tax

 ELEMENT INPUT VALUE DESCRIPTION

<BASE NAME> ISR Taxability This Input Value stores the ISR
Taxability Rule (Statutory, Full Subject
or Full Exempt) when the element was
created.
Value can be overridden in the
Element Entry or by the Element
Eligibility Criteria.

ISR Subject This field will store the Earning ISR

Subject Portion Run Result computed
by the fast formula during the payroll
<BASE NAME> Earnings run and feed the balances for ISR tax
Results calculation and ISR reporting.

This field will store the Earning ISR

Exempt Portion Run Result computed
ISR Exempt by the fast formula during the payroll
run and feed the balances for ISR tax
calculation and ISR reporting.

Subclassification Rules
Balance feeds defined by primary or secondary element classification or by a subclassification use the
input value that has the special purpose of primary output value. The unit of measure of this input
value must match the unit of measure of the balance.

Mexico localization provides several element subclassification for balance feeding.

For ISR Tax purposes, the following subclassifications have been seeded:
SUBCLASSIFICATION RULE DESCRIPTION

Fixed Earnings This subclassification identifies the elements that contribute to the
employee's base salary.
The balance fed by this subclassification will be used to compute the
Employee Monthly Ordinary Salary needed to compute ISR tax for
Severance and Nonperiodic earnings.
Eligible Days for Fixed Earnings The balance fed by this subclassification will be used to compute the
Employee Monthly Ordinary Salary.

21 W HITE PAPER / Mexico ISR Federal Income Tax

 Ensure that only one element use this subclassification (example: Salary
element), otherwise the number of salary days in the pay period will be
inaccurate.

Element Creation Example

This example demonstrates how to use the element template and create a regular earnings element,
such as salary, for Mexico.

 In the Payroll Calculation work area, select Manage Elements.

 Click Create.

 Complete the fields, as shown in this table.

FIELD VALUE

Legislative Data Group Enter the name of the Legislative Data Group (LDG) the element is
associated to.

Primary Classification Standard Earnings

Secondary Classification Regular

Category Standard

 Click Continue.

 Enter a name and other basic details, and then respond to the questions as shown in this table.
QUESTION ANSWER

Should every person eligible for the No

element automatically receive it?

What is the earliest entry date for First Standard Earnings Date
this element?

What is the latest entry date for this Last Standard Earning Date
element?

At which employment level should Assignment level

this element be attached?

Does the element recur each payroll Recurring

period, or does it require explicit
entry?

Process the element only once in Yes

each payroll period?

Can a person have more than one No

entry of the element in a payroll
period?

22 W HITE PAPER / Mexico ISR Federal Income Tax

 Process and pay element separately Process and pay with other earnings
or with other earnings elements?

 Click Next.

 On the Additional Details page, complete the fields, as shown in this table.
QUESTION ANSWER

What is the calculation rule? Flat Amount

Is this element subject to proration? No
Is this element subject to retroactive No
changes?
Use this element to calculate a No
gross amount from a specified net
amount?
Processing stop when the total is No
reached?
ISR tax calculation applicable to this Regular
element?
ISR taxability rule applicable to this Regular
element

Note: The ISR tax calculation method is ‘Regular’ only for those elements with 'Process and Pay with
Other Earnings' rule. The Severance’ option is enabled only for Severance elements.

 Click Next.

 Verify that the information shown on the Create Element: Review page is correct.

 Click Submit.

CREATING AN ELIGIBILITY RECORD

On the Element Summary page, update the newly created element details.

 In the Element Overview section, select Element Eligibility.

 Select Actions and Create Element Eligibility.

 On the Element Eligibility name field, enter a name for the eligibility.

 In the Eligibility Criteria section, select All Payrolls Eligible.

 Click Submit.

CREATING INPUT VALUES

 Click an Input Value in the left panel to provide additional information as needed.

CREATING A SUB CLASSIFICATION RULE

On the Element Summary page, you can create a sub classification rule for this element.

 In the Element Overview section, select Sub classification Rules.

23 W HITE PAPER / Mexico ISR Federal Income Tax

 Click the Add Row icon in the Sub classification Rules section.

 Select a Name from the list and enter the Effective Start Date.

 Click Submit.

Mexico localization has seeded Sub-classifications depending on the Primary and Secondary
classifications.

Repeat this entire process to create a set of elements to support your business needs. For example,
you might create another element for a car allowance. For earnings to be associated with a person,
you must create an element entry for that person and that element.

ISR TAX CALCULATION

Oracle Fusion Global Payroll for Mexico supports the following ISR Tax calculation methods:

 Regular

 Nonperiodic

 Severance

These calculation methods are based on the answers to the Element Template questions when the
earning elements were created.

The answer to the ISR Tax Processing Type question during element definition, determines the ISR
tax calculation method used for the earning.

Regular Earnings
Mexico payroll localization supports the ISR tax calculation for Regular earnings according ISR Tax
Law Article 96.

In order to trigger the Regular tax processing the earning elements should have been created setting:

 The “ISR Tax Calculation Type” to “Regular”

Nonperiodic Earnings
Mexico payroll localization supports the ISR tax calculation for Nonperiodic earnings (ISR Tax Code
Article 174)

In order to trigger the Nonperiodic tax processing the earning elements should have been created
setting:

 The “ISR Tax Calculation Type” to “Nonperiodic”

 Select “Process separately, but pay with other earnings” or “Process Separately and pay
separately” rules.

The tax rate for Nonperiodic earnings is based on the employee's monthly salary.

Typically this tax calculation should be used for the following earnings:

 Christmas Bonus

 Dominical Premium

24 W HITE PAPER / Mexico ISR Federal Income Tax

 Profit Sharing

 Vacation Premium

Severance Earnings
Mexico payroll localization supports the ISR tax calculation for Severance earnings according ISR Tax
Law Article 95.

In order to trigger the Severance tax processing the earning elements should have been created
setting:

 Element Primary Classification as “Severance Pay”

 The “ISR Tax Calculation Type” as “Regular”

The Severance tax calculation method will be applied to the consolidated total amount of the
severance earnings subject for ISR and if this amount is greater than the employee's monthly salary. If
it is not, then the Regular tax calculation method will be applied.

Subsidy for Employment

ISR Tax Law Transitory Article Ten (former Article 8th of October 1st of 2007 Decree) states that
contributors who earn an income caused by salaries will enjoy a Subsidy for Employment.

Subsidy for Employment is computed only on ISR Tax for regular earnings calculation method and it
will be zero for Nonperiodic and Severance methods.

The rules for ISR Subsidy for Employment calculation are as follows:

 The total amount of Subsidy for Employment paid in a month cannot exceed the maximum
amount specified in the Subsidy for Employment rates table in compliance the ISR Tax Law.

 During a payroll run, the Subsidy for Employment components adjust automatically the amount of
subsidy to prevent exceed the monthly cap. This adjustment compares the Month to Date (MTD)
balance and controls cases such as: In a weekly payroll, the employee is eligible for Subsidy for
Employment in the first two periods, but in the third period, the worker earns supplemental
earnings (overtime, bonus, sales commissions, etc.) that reduces or eliminate the amount of
Subsidy for Employment.

 If the Subsidy for Employment paid in the month exceeds the prorated rate, the algorithm adjusts
the subsidy for employment.

 The payroll process computes the month-to-date balance based on Pay Date.

 For payroll periods less than a month, the payroll application divides the subsidy for employment
rates by 30.4 and multiplies them by the number of days in payroll period.

 The adjustment algorithm prorates the subsidy for employment rates based on the number of
days in the month. For example, in a weekly payroll frequency scenario, the proration is based on
21 days for the third pay period in the month (7 * 3 = 21).

Monthly Salary Calculation for ISR Tax

The ISR Tax calculation methods for Severance and Nonperiodic earnings are dependent on the
employee's monthly salary.

25 W HITE PAPER / Mexico ISR Federal Income Tax

The ordinary monthly salary calculation for an employee is based on the following Element Sub-
Classifications:

 Fixed Earnings

 Eligible Days for Fixed Earnings

To determine monthly salary, Oracle Payroll will automatically perform the following operations until
one of the conditions are satisfied in order to derive a base pay amount to be used.

1. Derive the salary using the “Fixed Earnings” setup.

2. Derive Regular Earnings of Current Pay Period if fixed pay is zero.

3. Derive Regular Earnings of Previous Pay Period if both fixed pay and regular earnings for current
pay period are zero.

Taxability Rules
The very first step before calculate ISR tax is to compute the tax subject amount.

The tax subject amount is the result of the earning amount minus the exemption portion (if there is).

Statutory ISR Tax exemptions are described in the ISR Tax Law article 93 and could be based on
individual earnings or consolidated earnings such as Social Foresight and Severance earnings.

The rules to compute ISR tax exemptions are known as ISR Taxability Rules.

During element definition, the element template prompts you for information that is used to create the
necessary payroll objects. The combination of the primary and secondary classification you select
determines the statutory ISR taxability rules the payroll process will use to compute the subject and
exempt portions of the earnings.

ISR Taxability Rule and element Input Value Run Results will depend on the answer to Element
Template question “ISR taxability rule applicable to this element?” when the element was created.

Example:

 Element Name: Christmas Bonus

 Primary Classification: Supplemental Earning

 Secondary Classification: Christmas Bonus

 Earning Amount: 5000

ELEMENT INPUT VALUES RUN RESULTS

ISR TAXABILITY
TAX RULE APPLIED
RULE
ISR SUBJECT ISR EXEMPT

Statutory Exemption will be up to 30 2585.3 2414.7

times of UMA value (ISR
Tax Law Article 93):
(84.49*30= 2414.7)

Full Subject Exemption will be 0 5000 0

26 W HITE PAPER / Mexico ISR Federal Income Tax

 Full Exempt Exemption will be earnings 0 5000
amount.

ISR Taxability Rules are based on the MX_ISR_TAX_RULE value definition group.

ISR Tax Rates

Mexico localization supports only the ISR Tax rates described in the “ISR Tax Rates” value definition
group:

 ISR Monthly Subsidy Rate

 ISR Monthly Tax Rate

 ISR Annual Adjustment

Payroll Frequencies
Monthly ISR Tax rates are prorated to compute the tax for other payroll frequencies.

Application allows computing the ISR tax for the following payroll frequencies:
PAYROLL FREQUENCY NUMBER OF DAYS

Weekly 7

Biweekly 14

Semimonthly 15

Monthly 30.4

Payroll Run Types

Delivered with Mexico Payroll are additional parameters used in the Payroll Run process and in the
Quickpay called Payroll Run Types. This mechanism identifies the Tax Processing Type of each
earnings element and instructs Oracle Payroll on which taxation method to use.
PAYROLL RUN TYPE DESCRIPTION

Regular Prorate monthly table rates based on the payroll frequency and compute the tax
for the subject earnings earned in the pay period.

ISR ELEMENTS
The following elements have been seeded by Mexico localization to compute ISR Tax:
ELEMENT DESCRIPTION INPUT VALUES

ISR Tax Computes the ISR Tax  ISR Subsidy For Employment Paid
 ISR Withheld
 ISR Tax To Charge
 ISR Subsidy For Employment
 ISR Calculated

27 W HITE PAPER / Mexico ISR Federal Income Tax

  ISR Withheld Nonperiodic
 ISR Subject Nonperiodic
 ISR Withheld Severance
 ISR Withheld Regular
 ISR Calculated Nonperiodic
 ISR Subsidy For Employment Paid Nonperiodic
 ISR Subsidy For Employment Nonperiodic
 ISR Calculated Regular
 ISR Calculated Severance
 ISR Subsidy For Employment Regular
 ISR Subsidy For Employment Severance
 ISR Subsidy For Employment Paid Regular
 ISR Subsidy For Employment Paid Severance
 Daily Salary
ISR Tax Subject Compute subject and  SFE ISR Exempt
exempt portions for  SFE ISR Subject
consolidated earnings:
 Severance ISR Exempt
Social Foresight and
Severance.  Severance ISR Subject

These elements are triggered through auto indirect from “Mexico Taxation” Element.

There is no need to create element entries for these elements meanwhile the employee has a valid
TRU association in the Employee Tax Card.

Run Results
Once payroll has been processed, the ISR Tax element run results provide the tax calculation details
by ISR Tax calculation method:

28 W HITE PAPER / Mexico ISR Federal Income Tax

Depending on the ISR taxability rules, the ISR Tax Subject element run results provide the subject and
exempt amounts for Social Foresight and Severance consolidated earnings:

Balances
The following balances have been seeded by Mexico localization to support ISR Tax.

29 W HITE PAPER / Mexico ISR Federal Income Tax

 BALANCE
BALANCE NAME CATEGORY REPORTING NAME

ISR Calculated Miscellaneous ISR Calculated

ISR Calculated Nonperiodic Tax Deduction Detail ISR Calculated Nonperiodic

ISR Calculated Regular Tax Deduction Detail ISR Calculated Regular

ISR Calculated Severance Tax Deduction Detail ISR Calculated Severance

ISR Exempt Miscellaneous ISR Exempt

ISR Nonworking Days Miscellaneous ISR Nonworking Days

ISR Subject Miscellaneous ISR Subject

ISR Subject for Severance Miscellaneous ISR Subject for Severance

ISR Subject Nonperiodic Miscellaneous ISR Subject Nonperiodic

ISR Subsidy for Employment Miscellaneous ISR Subsidy for Employment

ISR Subsidy For Employment
Nonperiodic Tax Deduction Detail ISR Subsidy For Employment Nonperiodic
ISR Subsidy for Employment
Paid Miscellaneous ISR Subsidy for Employment Paid
ISR Subsidy For Employment Employee Tax
Paid Nonperiodic Credits ISR Subsidy For Employment Paid Nonperiodic
ISR Subsidy For Employment Employee Tax
Paid Regular Credits ISR Subsidy For Employment Paid Regular
ISR Subsidy For Employment Employee Tax
Paid Severance Credits ISR Subsidy For Employment Paid Severance
ISR Subsidy For Employment
Regular Tax Deduction Detail ISR Subsidy For Employment Regular
ISR Subsidy For Employment
Severance Tax Deduction Detail ISR Subsidy For Employment Severance

ISR Tax to Charge Miscellaneous ISR Tax to Charge

ISR Withheld Miscellaneous ISR Withheld

ISR Withheld Nonperiodic Tax Deductions ISR Withheld Nonperiodic

ISR Withheld Regular Tax Deductions ISR Withheld Regular

ISR Withheld Severance Tax Deductions ISR Withheld Severance

Statement of Earnings
Input Values, Run Results and Balances related to ISR Tax calculation are displayed in the Statement
of Earnings (SOE).

30 W HITE PAPER / Mexico ISR Federal Income Tax

31 W HITE PAPER / Mexico ISR Federal Income Tax
HOW TO SETUP
The application setup for ISR Tax processing is as follows:
STEP DESCRIPTION NOTES

1 Enable Mexico Payroll environment for ISR Ensure the following steps are completed
successfully:

1. Enable Payroll License for Mexico

2. Enable “Mexico Federal Tax” Jurisdiction
3. Create Mexico Legislative Data Group (LDG)

Please refer to:

https://support.oracle.com/epmos/faces/Docu
mentDisplay?id=2175160.1

2 Create Legal Entities and Payroll Statutory Ensure Legal Employer is set as PSU.
Units (PSU)
3 Verify “ISR Tax Rates” value definition group Ensure ISR Tax Rates and UMA value definitions
information are updated.

4 Verify Organization Card information Enter overrides for “Employer ISR Tax Information”
value definition group if needed.

5 Verify Personal Card information For employees:

1. Ensure “Employee Tax Card” has been created
2. Ensure TRU Association has been created.
3. Enter overrides for “Employee ISR Tax
Information” value definition group if needed.

6 Create earning elements Ensure the following element information has been
entered correctly according the business needs :
 Primary classification
 Secondary classification
 “Process and Pay” rule
 “ISR tax calculation type” rule
 “ISR taxability” rule
 “Sub-classification” rules

HOW TO USE
Process payroll to compute ISR Tax for employees.

RESOURCES
Other Information Sources :

Oracle Fusion Applications Documentation: Oracle Fusion Human Capital Management

http://docs.oracle.com/cd/E38454_01/nav/hcm.htm

32 W HITE PAPER / Mexico ISR Federal Income Tax

Oracle Fusion Applications Help (external access)
https://fusionhelp.oracle.com

Book List: Oracle Global Human Resources Cloud Release 9

http://docs.oracle.com/cloud/latest/globalcs_gs/docs.htm

Oracle Fusion On-Premise Quick Start Implementation Guide:

https://support.us.oracle.com/oip/faces/secure/km/DocumentDisplay.jspx?id=1395863.1

Oracle Applications Cloud Using Functional Setup Manager

http://docs.oracle.com/cloud/latest/common/OAFSM.pdf

Implementing Global Human Resources

http://docs.oracle.com/cloud/latest/globalcs_gs/docs.htm

Using Global Human Resources

http://docs.oracle.com/cloud/latest/globalcs_gs/docs.htm

Oracle Fusion HCM (Mexico): HR Implementation

https://support.oracle.com/epmos/faces/DocumentDisplay?id= 2175160.1

Oracle Fusion HCM (Mexico): National Identifier Validation

https://support.oracle.com/epmos/faces/DocumentDisplay?id=2116899.1

33 W HITE PAPER / Mexico ISR Federal Income Tax

ORACLE CORPORATION

Worldwide Headquarters
500 Oracle Parkway, Redwood Shores, CA 94065 USA

Worldwide Inquiries
TELE + 1.650.506.7000 + 1.800.ORACLE1
FAX + 1.650.506.7200
oracle.com

CONNECT W ITH US
Call +1.800.ORACLE1 or visit oracle.com. Outside North America, find your local office at oracle.com/contact.

blogs.oracle.com/oracle facebook.com/oracle twitter.com/oracle

Copyright © 2019, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only, and the contents hereof are
subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed
orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any
liability with respect to this document, and no contractual obligations are formed either directly or indirectly by this document. This document may not be
reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission.
Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.
Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license and are trademarks or
registered trademarks of SPARC International, Inc. AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks
of Advanced Micro Devices. UNIX is a registered trademark of The Open Group. 0519
White Paper Title: Mexico Federal Incone Tax (ISR)
May 2019
Author: Marco Antonio, Danae Galicia Piedra
Contributing Authors: [OPTIONAL]