The State Finance Department submitted a Revenue Bill to the Chihuahua State Legislature for the 2014 fiscal year. Among other things, the bill provides for a 1% increase to the payroll tax. The current payroll tax rate under the Chihuahua State Tax Code is 2%, while the executive bill proposes a hike to 3%, meaning that, if enacted, taxpayers would see a 50% increase in their payroll tax burden.

Note that the State Legislative enacted a new tax called the “5% surtax” on December 28, 2011, assessing an additional tax equal to 5% of the payroll tax incurred.

Baker & McKenzie filed several lawsuits against the law, successfully arguing before the federal courts that the 5% surtax rules were unconstitutional.


In this regard, if the increased payroll tax rate is enacted, taxpayers would see a higher tax burden; the tax would go up by 50% and the surtax would increase accordingly, as the surtax basis is calculated according to the monthly payroll tax determination.

We await the State Legislature’s decision on the payroll tax hike, to assess any potential constitutional issues and the likelihood of success of an injunction against the amendment