Does hiring a salesperson in Mexico create a taxable presence?

Yes, it can, and the arrangement you use to employ the person will not decide it. Under the Ley del Impuesto sobre la Renta a foreign resident has a permanent establishment in Mexico where it has a fixed place of business through which it carries on business activities, and equally where it acts through a person who is not an independent agent and who habitually concludes contracts in its name or on its behalf. Where a permanent establishment exists, Mexico taxes the income attributable to it.

Nearly everything written about this in English answers a different question, which is whether a maquiladora creates a permanent establishment. That is a manufacturing question, written by shelter service providers for companies moving production. If you are an exporter putting one commercial person into Mexico, it does not describe your situation.

What is inside the line and what is outside it

The statute excludes activities that are preparatory or auxiliary. In practice that keeps you outside the definition where the person in Mexico is doing things like:

• gathering market information and reporting it home
• storing or displaying goods without selling them
• purchasing goods for the foreign company
• supporting customers technically after a sale concluded abroad

It stops helping you when the person starts doing the commercial work:

• negotiating price and terms
• accepting orders
• routinely playing the decisive role in contracts that the head office then signs without material change

That last one is the modern formulation and it matters. The old defence was that the country manager could not sign, so head office concluded every contract. Mexico has ratified the OECD Multilateral Instrument, which for many of its treaties updates the agency article in the direction of catching a person who habitually plays the principal role leading to the conclusion of contracts, even without signature authority. Check your own country's treaty as modified by the MLI rather than assuming the pre-2017 position.

The employer of record trap

An employer of record solves a real problem. It lets you put someone in Mexico with a compliant local employment contract, payroll, and social security, without incorporating. It does not solve the permanent establishment question, and it is regularly sold as though it does.

The reason is that the domestic test and the treaty test both look at function. What is the person doing on the ground, for whose account, and with what authority in substance. Whose entity issues the payslip is not one of the criteria. A country manager on an employer of record contract who negotiates and closes deals for a Danish manufacturer is doing exactly what the agency provision describes.

If the role is genuinely support and information, an employer of record is a clean and sensible structure. If the role is selling, treat the permanent establishment risk as live and price it, or take the entity.

Two situations European industrial companies keep missing

Commissioning crews. The statute treats construction, demolition, installation, maintenance or assembly work on immovable property, together with related projection, inspection or supervision, as a permanent establishment where it lasts more than 183 calendar days, consecutive or not, in any twelve month period. Those three words matter for a capital equipment exporter, because whether the plant you install is immovable property is a fact-specific question and it decides whether the clock runs at all. Where it does, count the days across the whole period rather than per visit; several short trips add up, and the calculation is generally done project by project.

The agent who is not really independent. A genuinely independent commercial agent, acting for several principals in the ordinary course of their own business, does not create a permanent establishment for any of them. An agent who works effectively only for you, whose commercial instructions come from you, and whose economic risk sits with you, is not independent in substance whatever the contract calls them. Exclusivity plus economic dependence is the pattern that gets looked at.

What to do with this

The practical sequence is unglamorous. Write down what the person will actually do, in verbs. Compare that with the agency provision in your country's treaty with Mexico, as modified by the Multilateral Instrument. If the answer is close to the line, get a Mexican tax opinion before the hire rather than after the first audit, because the remedy afterwards is a filing history you do not have.

Mexico has a double taxation convention with Denmark and treaties with most EU member states, and the treaty definition usually governs over the domestic one. That is a helpful fact only if you have read yours.

For the wider structural decision, see do you need a Mexican company to sell in Mexico.

Common questions

Does a sales representative create a permanent establishment in Mexico?

They can. Mexican law and Mexico's treaties treat a dependent agent who habitually concludes contracts, or who habitually plays the principal role leading to their conclusion, as creating a permanent establishment. A representative limited to information gathering and support generally does not.

Does using an employer of record avoid permanent establishment in Mexico?

No. An employer of record makes the employment compliant; it does not change what the person does. The permanent establishment test is functional, so a selling role carries the same risk under an employer of record as on a foreign payroll.

How long can an installation project run in Mexico before it creates a permanent establishment?

The domestic threshold is more than 183 calendar days, consecutive or not, in a twelve month period, for construction, demolition, installation, maintenance or assembly work on immovable property. Whether your equipment counts as immovable property is a prior question worth settling first. Treaty thresholds can differ, and days are counted cumulatively across the project.

Does a home office in Mexico count as a fixed place of business?

It can. A fixed place of business does not have to be an office lease. Where an employee habitually carries on the company's business from a home in Mexico and the company has that space effectively at its disposal, the fixed place limb can be met independently of the agency limb.