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Tax rates in Mexico

Tax Rates

Consumption Taxes

Nature of the Tax
VAT, called 'Impuesto al Valor Agregado' or 'IVA'.
Tax Rate
16%
Reduced Tax Rate
The supply of goods and services, as well as the use or enjoyment of goods in locals or establishments located in the cross-border zone, are subject to a reduced rate of 8%.
The 0% VAT rate is applicable to a substantial number of transactions, including the exportation of goods and certain services, unprocessed food and milk; patented medicines; feminine hygiene products; etc.
Other Consumption Taxes
Excise duties apply on gasoline (% variable), beer (26.5%), wine (26.5% to 53%), spirits (53%), cigarettes and other tobacco products (160% plus an additional quota), services for raffles and gambling (30%), soft drinks (MXN 1/litre), "junk" food (8%), and telecommunications services (3%).
Excise taxes on soft drinks and tobacco products are updated according to the Mexico inflation rate.
The acquisition of new vehicles is subject to taxation, while the different states may impose a tax on the ownership of vehicles.

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Corporate Taxes

Company Tax
30%
Tax Rate For Foreign Companies
Mexican resident taxpayers’ are subject to corporate income tax from worldwide sources, foreign residents are taxed on the income attributed to their permanent establishments in Mexico.
Foreign enterprises established in Mexico are subject to the same tax system as national enterprises, though they do benefit from certain exemptions. Although various states have started to offer competing tax incentives to attract foreign investors, the majority of taxes in Mexico are levied at the federal level.
Capital Gains Taxation
Capital gains arising from the sale of fixed assets, shares and real property are considered normal income and are subject to the standard corporate tax rate.
Capital gains arising from the sale of shares issued by Mexican companies, securities solely representative of such shares, shares issued by foreign companies listed on the Mexican stock exchange or financial derivative instruments in connection with stock market indices or aforementioned shares are subject to an income tax of 10%.
Non-residents that sell shares of a Mexican company are subject to tax at 25% on the gross proceeds or 35% on the net proceeds if the non-resident has a representative in Mexico (provided the non-resident is neither located in a tax haven nor benefits from a preferential tax regime).
Main Allowable Deductions and Tax Credits
In general, all federal, state, and local (including the municipal tax on real estate) taxes levied on a company (not including taxes on acquisitions of fixed assets and real estate and CIT) are tax-deductible expenses.

Start-up expenditure incurred prior to the commencement of business may be amortised at the yearly rate of 10%, after applying the adjustment factors. The deduction of charitable contributions is limited to 7% of the taxable income of the previous year.

R&D expenditure (including investment in R&D) gives rise to a 30% tax credit.

In order to be deductible, payments related to technical assistance, the transfer of technology, or royalties must be made directly to companies with the required technical capabilities to provide the corresponding service. Payments to foreign affiliates are deductible if they respect the arm's-length principle.

Net operating losses can be carried forward up to 10 years (15 years for deep-water operations related to oil extraction activities), subject to adjustments for inflation. The carryback of losses is not permitted.

Non-deductible items include penalties, unauthorised donations, contingencies, indemnities, goodwill, exempt salaries, etc.

Other Corporate Taxes
After their first year of operations, companies may be subject to employee profit-sharing tax (10%), as well as special excise taxes on production and services (tax losses cannot be applied against the profit-sharing base, and no later than May of the year following the year in which the profits were generated).
The transfer of real estate is subject to a tax at rates ranging from 2% to 5% on the highest of the value of the transaction, fair market value, or registered municipality value (some exceptions apply). Real property taxes are levied by the states at different rates.

Companies engaged in oil exploration and production are subject to a special tax regime as set out in the Hydrocarbons Revenue Law.

Social security contributions are based on the daily salary plus any other compensation paid to the employee, with rates varying according to the base salary of their Mexican employees and the type of concepts for which the compensation is given to the employee (ranging from 15% to 25%).

The acquisition of new vehicles is subject to taxation, while the different states may impose a tax on the ownership of vehicles. Mexico does not levy stamp duties.

Other Domestic Resources
Mexican Federal Tax Administration
Doing Business: Mexico, to obtain a summary of taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Mexico Latin America & Caribbean United States Germany
Number of Payments of Taxes per Year 6.0 28.2 10.6 9.0
Time Taken For Administrative Formalities (Hours) 240.5 327.5 175.0 218.0
Total Share of Taxes (% of Profit) 55.1 46.8 36.6 48.8

Source: Doing Business, Latest available data.

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Individual Taxes

Tax Rate

Annual Tax Rates for Resident Individuals Vary from 1.92% to 35% (2022)
from MXN 1 to 7,735.00 1.92%
from MXN 7,735.01 to 65,651.07 6.4%
from MXN 65,651.08 to 115,375.90 10.88%
from MXN 115,375.91 to 134,119.41 16%
from MXN 134,119.42 to 160,577.65 17.92%
from MXN 160,577.66 to 323,862.00 21.36%
from MXN 323,862.01 to 510,451.00 23.52%
from MXN 510,451.01 to 974,535.03 30%
from MXN 974,535.04 to 1,299,380.04 32%
from MXN 1,299,380.05 to 3,898,140.12 34%
over MXN 3,898,140.12 35%
Allowable Deductions and Tax Credits
Deductions are subject to an annual limit equal to the lesser of 15% of the yearly overall income of the taxpayer or an amount equal to five annual UMA (a maximum of MXN 175,505 in 2022).
Deductions are granted for business expenses, medical, hospital and dental expenses as well as a limited amount of medical insurance, retirement annuities, mortgage interest, etc. Personal allowances are also granted to the taxpayer and his or her dependents.
Contributions made to authorised charities are deductible, limited to 7% of the prior year's taxable income. Home mortgage interest (adjusted for inflation) is deductible, subject to certain limits.
Taxpayers are allowed to deduct tuition expenses paid for their spouse, children, parents, and themselves. The maximum amount deductible per student varies from MXN 12,900 to MXN 24,500, depending on the level of education.
Resident taxpayers are allowed to deduct un-reimbursed medical, dental, nutritionist, psychologist, health insurance premiums, and funeral expenses for themselves and their dependents when they are not paid in cash.

Business owners and independent professionals can generally enjoy the same deductions as corporations.

More information regarding deductions can be found on the Mexican Federal Tax Administration website.

Special Expatriate Tax Regime
Residents must pay taxes for their worldwide income, non-residents must pay only for income earned from Mexican sources. No special regime applies to expatriates.
If an employee is considered a non-resident for Mexican tax purposes, the tax rate applicable to compensation will vary from 15% (MXN 125,900 to 1 million) to 30% (above MXN 1 million). The first MXN 125,900 of employment income received in a 12-month floating period will be tax-exempt.
Non-residents are subject to withholding taxes on Mexican-source interest income, with rates between 0% and 35%. Gains arising from sales of real property located in Mexico and the sale of shares of Mexican companies outside the Mexican stock exchange are also subject to taxation: in general, the non-resident investor can elect to pay either a flat rate of 25% of the gross proceeds or 35% of the net gain. Sales of shares in the Mexican stock exchange are subject to a flat 10% tax withholding.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
List of double taxation agreements signed by Mexico
Withholding Taxes
Dividends: 0 (resident companies)/10% (resident individuals and non-residents); Interest: 0 (resident companies)/up to 20% (to resident individuals)/from 4.9% (paid to foreign banks) to 35% (standard rate for non-residents) / 40% (if paid to a related party located in a tax haven); Royalties: 0 (resident companies and individuals)/25% (standard for non-residents)/35% (patents and trademarks paid to non-residents)/40% (if paid to a related party located in a tax haven).

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Latest Update: June 2022