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What is RFC in Mexico?

What is RFC in Mexico TL;DR

The Registro Federal de Contribuyentes (Federal Taxpayers Registry) is better known as RFC. It’s a 13-character code made up of letters and numbers used by the Mexican Government to identify individuals and legal entities (companies) that are liable to pay taxes in Mexico. It’s equivalent to the SSN or EIN in the US.

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RFC Equivalent in the US, Canada and the UK

United States

The closest equivalent in the U.S. would be the Employer Identification Number (EIN) for companies and the Social Security Number (SSN) for individuals. However, the SSN in the US is not used specifically for corporate tax purposes, but primarily for individual identification and tax filing, while the RFC is used for both individuals and corporations.

Canada

In Canada, the equivalent would be the Social Insurance Number (SIN) for individuals. For companies, Canada uses a Business Number (BN), which is similar to the RFC for companies.

United Kingdom

In the UK, individuals are identified for tax purposes by their National Insurance Number (NIN), which functions similarly to the RFC in Mexico for individuals. For businesses, the equivalent is a Unique Taxpayer Reference Number (UTR), which is issued to companies and self-employed individuals for tax purposes.

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RFC for Individuals and Companies

“Persona física” vs. “Persona moral”

Foreigners can have difficulty understanding the differences between “Persona física” and “Persona moral”, especially those who speak English. When you translate it in English, it doesn’t make sense. A “moral” person in English means a person of good intentions, an honest person, with ethics. It has nothing to do with entrepreneurship. The difference between a “Persona física” and a “Persona moral” is that a Persona física is an individual while a Persona moral is a group of individuals with a common goal whether for-profit or not-for-profit.

Moral Comes from the Latin Term “Moralis”

The term moral in this context derives from the Latin moralis, understood as “social” or “collective,” and France uses it in the same way (personne morale). Everywhere else in Latin America—along with Brazil in Portuguese—and also Spain, the phrase “persona jurídica” is used instead, referring to the same concept: a legal entity recognized by law, distinct from an individual.

A bearded man working as a taco vendor holds a mobile payment terminal for a woman to pay at a taco stand.
A taco vendor would be a persona física according to SAT.

RFC for Individuals and Companies

“Persona física” vs. “Persona moral”

Foreigners can have difficulty understanding the differences between “Persona física” and “Persona moral”, especially those who speak English. When you translate it in English, it doesn’t make sense. A “moral” person in English means a person of good intentions, an honest person, with ethics. It has nothing to do with entrepreneurship. The difference between a “Persona física” and a “Persona moral” is that a Persona física is an individual while a Persona moral is a group of individuals with a common goal whether for-profit or not-for-profit.

Moral Comes from the Latin Term “Moralis”

The term moral in this context derives from the Latin moralis, understood as “social” or “collective,” and France uses it in the same way (personne morale). Everywhere else in Latin America—along with Brazil in Portuguese—and also Spain, the phrase “persona jurídica” is used instead, referring to the same concept: a legal entity recognized by law, distinct from an individual.

Persona física = Employee/individual business under their own name and RFC.
Persona moral = company with its own legal identity and RFC.

In the case of a solo entrepreneur most people register as a “persona física con actividad empresarial” (an individual with business activity) instead of incorporating because it’s simpler and avoids having two RFCs.

“Persona física” vs. “Persona moral”
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RFC for an Individual

According to the SAT, “Persona física” is any individual who performs an economic activity, such as an employee, solo professional, or solo merchant. The RFC of a Persona física has 13 characters:

  • The 1st and 2nd characters are composed of: first letter of the paternal last name + first vowel of the paternal last name.
  • The 3rd character corresponds to the first letter of the second last name (if a second last name isn’t applicable, “X” will be used).
  • The 4th character is the first letter of the first name.
  • The 5th and 6th characters are the last two digits of the year of birth.
  • The 7th and 8th characters equal the month of birth in two digits (Example: January=01).
  • The 9th and 10th characters equal the day of birth in two digits.
  • Finally, the RFC ends with 3 random characters which Mexico calls “homoclave” that are assigned by the SAT. The homoclave is used to avoid possible duplicates.

RFC for Corporations

According to SAT, a corporation or legal entity is a group of individuals who join together to form a company, also called a partnership or organization. Typically, a company’s goal is to engage in economic activities, that is, to make money. However, there are also non-profit companies such as a church or an organization that provides help to the homeless. Corporations are identified by their corporate name. The RFC assigned to corporations is composed of 12 digits.

What Do the Characters of the Corporate RFC Mean?

The 12 characters of the corporate RFC are broken down as follows:

  • The first three characters of the RFC refer to the corporate name.
  • The next six characters correspond to the incorporation date (YY, MM, DD).
  • Finally, last three characters are once again the unique “homoclave” assigned by the SAT, used for the same purpose as the RFC for a “Persona física” as mentioned above. It’s used to prevent duplicates.