Understanding a Tax Refund (Saldo a Favor)
If you were one of the fortunate individuals who received a tax refund, known as “saldo a favor,” after filing your annual tax return in Mexico, it’s time to request the refund. Here’s a guide on how to obtain this refund and what steps follow to receive your money back.
What is a Tax Refund (Saldo a Favor)?
A tax refund, or “saldo a favor,” occurs when the tax authority returns taxes you paid in previous fiscal years due to personal deductions. These deductions reduce your taxable income, resulting in an overpayment that is refunded.
Eligible Expenses for Tax Refund
As a taxpayer, you have the right to deduct various personal expenses. These include:
- Medical expenses up to 2,500 pesos
- Funeral expenses up to 39,606 pesos
- Tuition fees: pre-school up to 14,200 pesos; primary school up to 12,900 pesos; secondary school up to 19,900 pesos; bachelor’s degree up to 24,500 pesos; and professional technical career up to 17,100 pesos
- School transportation costs (included in tuition fees)
- Premiums for medical expense insurance
- Charitable donations
- Additional contributions to your Afore (private pension account)
- Special savings accounts for retirement, such as Individual Retirement Plans (IRAs), up to 152,000 pesos
- Interest on home loans
To claim these deductions, you must provide proof of payment, such as invoices or receipts, for the expenses mentioned above.
Automatic Refund
If you received a tax refund after filing your return, there are two options: automatic refund or denial of the request.
According to Rodolfo Jerónimo Pérez, a member of the technical committee of the Public Accountants College of Mexico, automatic refunds usually take between 7 and 10 business days for the tax authority to process.
For automatic refunds, taxpayers only need to wait for the money to be deposited into the account they provided during their tax declaration.
Jerónimo Pérez advised that if the tax refund exceeds 10,000 pesos, taxpayers must provide their electronic signature (e.firma) for the refund. Therefore, it is recommended that taxpayers ensure they have this document and verify its validity.
Refund Denial
If the tax authority denies your refund request, there are two paths: either the authority requests the taxpayer to personally verify the refund’s legitimacy or a manual refund through the taxpayer’s buzón tributario (tax portal).
Jerónimo Pérez explained that this usually happens when there are discrepancies between the tax authority’s data and the information provided by the taxpayer in their declaration. In such cases, the tax authority reviews the information to ensure the refund’s legitimacy.
He added that in these situations, the tax authority may take more time to process refunds. However, by law, the tax authority has 40 business days from the request to return the money to the taxpayer.
“If the tax authority requests additional information from the taxpayer, this 40-day period is paused until the taxpayer responds,” explained the accountant.
Recommendations for Taxpayers
- Thoroughly review the legitimacy of the tax refund, as failing to do so may result in being asked to return the money along with penalties and interest.
- If you have any doubts about the refund’s legitimacy, consult a tax professional or accountant.
Key Questions and Answers
- What is a tax refund (saldo a favor)? A tax refund, or “saldo a favor,” is when the tax authority returns excess taxes you paid in previous fiscal years due to personal deductions.
- What expenses can I deduct to receive a tax refund? Eligible expenses include medical, funeral, tuition, transportation, insurance premiums, charitable donations, additional Afore contributions, and retirement savings account contributions. Interest on home loans is also deductible.
- How long does it take to receive an automatic tax refund? Automatic tax refunds usually take between 7 and 10 business days.
- What if my tax refund is denied? If your tax refund request is denied, the tax authority may ask you to verify the legitimacy of the refund or process it manually. This usually occurs due to discrepancies between your data and the information provided in your tax declaration.
- What should I do if I’m unsure about my tax refund? Consult a tax professional or accountant to ensure the legitimacy of your tax refund and avoid potential complications.
