In Mexico, voluntary savings in Retirement Funds Administrators (AFORE) have specific tax implications. A 20% withholding tax on the withdrawn amount applies if funds are withdrawn before age 65 or within five years of contribution. This measure aims to discourage premature use of retirement funds.
To avoid the 20% withholding, individuals must be at least 65 years old and have maintained their savings in the AFORE for at least five years. Voluntary savings offer tax benefits, including deductions of up to 10% of income, capped at five annual Measurement and Update Units (UMA).
A 0.97% ISR withholding applies to generated interest upon withdrawal, regardless of age or investment duration. Failure to meet the required terms for deductions may result in the loss of tax benefits. It is recommended to consult with your AFORE or the SAT for personalized advice.