Taxes in Mexico in 2026

Who counts as a tax resident of Mexico

The first thing to understand about Mexico is that domestic law has no 183-day rule. Article 9 of the Federal Tax Code (Código Fiscal de la Federación) ties residency to where you keep a home, not to how many days you spend in the country.

The test runs like this:

• A home in Mexico (casa habitación). If you have established a dwelling in the country, you are a tax resident. Days are not counted at all.
• A home in two countries. The centre of vital interests test then applies. It sits in Mexico if more than 50% of your total income for the calendar year has a Mexican source, or if your main centre of professional activity is in Mexico.
• Mexican nationals. They are presumed resident until they prove otherwise.

The 183-day figure does show up in Mexico, but in two different places: in double tax treaties (the employment income rule and the tie-breaker for dual residency) and in the source rules for foreigners. On its own, spending 183 days in Mexico neither creates nor removes residency. For how the rule works elsewhere, see our guide to tax residency and the 183-day rule.

Moving mid-year

Mexico does not split the year pro rata: on any given income date you are either resident or you are not. In practice the SAT looks at the RFC registration date, the moment a home appeared and the actual start of activity.

Leaving is a separate formality. The notice of change of tax residency (aviso de cambio de residencia fiscal) must be filed no later than 15 days before the change takes effect. File nothing and you simply do not stop being a Mexican resident.

There is a trap worth naming. If you move to a jurisdiction with a preferential tax regime (REFIPRE, meaning low-tax and offshore countries) or cannot evidence your new residency, you stay a Mexican tax resident for the year of the notice and the following five years. Countries with a broad information exchange agreement with Mexico are the exception.

To claim treaty benefits you will need a constancia de residencia fiscal, the residency certificate issued by the SAT.

Personal income tax: the 2026 ISR brackets

Residents pay ISR on worldwide income; non-residents only on Mexican-source income. The scale is progressive with 11 brackets running from 1.92% to 35%. The 2026 tariffs were published in Annex 8 to the Miscelánea Fiscal resolution (DOF, 28 December 2025) and were indexed for accumulated inflation.

The mechanics: find your bracket, subtract the lower limit, apply the rate to the difference and add the fixed amount. Employers run the same calculation monthly on an equivalent monthly table whose top bracket starts at 425,642 MXN a month.

There is no tax-free allowance

ISR technically starts at the first peso, at 1.92%. Instead of an allowance, Mexico uses the subsidio al empleo, a credit for low wages. In 2026 it is roughly 536 MXN a month and applies while monthly income stays under 11,492.66 MXN. Above that line it drops to zero.

Some payments are exempt within limits pegged to the UMA. For 2026 the UMA is 117.31 MXN a day, 3,566.22 a month and 42,794.64 a year:

• the aguinaldo year-end bonus - up to 30 UMA, or 3,519.30 MXN;
• the prima vacacional holiday premium - up to 15 UMA, or 1,759.65 MXN;
• employee profit sharing (PTU) - up to 15 UMA;
• pensions - up to 15 UMA per day.

Personal deductions

In the annual return a resident may claim medical and funeral costs, mortgage interest, voluntary retirement contributions, medical insurance premiums, school transport and donations. The global cap is the lower of 15% of total income or 5 annual UMA, which is 213,973.20 MXN in 2026. School fees run under a separate decree with their own per-level limits.

No local surcharges on income

ISR is purely federal; states do not add their own rate on personal income. What states do levy is a payroll tax, and that one sits with the employer.

An honest read: the 35% rate kicks in very late, at roughly 5.1 million MXN a year (around USD 275,000), so effective ISR for mid-range earners typically lands between 10% and 18%. What actually makes Mexico expensive is not the scale but employer contributions and 16% VAT on consumption.

What a non-resident pays

Non-residents are taxed only on Mexican-source income. Tax is usually withheld at source on the gross amount with no deductions and is final, so no return is required. The rates look high precisely because costs are ignored.

The option to pay 35% on the net gain instead of 25% on the gross price is not open to everyone: you need a Mexican tax representative, and for shares you also need to be resident in a treaty country. On a property sold at a modest markup, the 25%-of-price route is almost always worse, because it ignores what you paid.

If a foreigner's activity creates a permanent establishment, the rules change completely: the PE computes profit like any Mexican company and pays 30%.

Corporate tax and business incentives

Corporate income tax (ISR corporativo) is a flat 30%, with no progression. It has not moved since 2010 and did not change for 2026. There is no state-level corporate income tax in Mexico.

Losses carry forward 10 years with inflation indexation; carry-back is not allowed. Interest deductions are capped: group net interest above 20 million MXN is deductible only up to 30% of adjusted profit, and a separate 3:1 thin capitalisation rule applies to debt owed to related non-residents.

Employee profit sharing

PTU is not formally a tax, but almost everyone pays it: 10% of the taxable base is distributed to employees. Since 2021 the payout is capped at three months of the employee's salary or the average PTU of the last three years, whichever is better for the employee. Model it from day one: PTU turns a headline 30% into an effective burden closer to 37% on distributed profit.

Small business: the RESICO regime

The Régimen Simplificado de Confianza is the most interesting feature of the Mexican system. For individuals with business or professional income (RESICO PF) and annual turnover up to 3,500,000 MXN, tax is calculated straight off cash received, with no deductions.

The conditions are strict but workable: a valid e.firma signature, an active Buzón Tributario mailbox, a CFDI invoice for every receipt, no controlling interest in a related company and returns filed on time. Cross 3.5 million MXN and you leave the regime from the following month and revert to the general one.

For companies, RESICO PM applies up to 35 million MXN of revenue: the rate stays at 30%, but income and expenses are recognised on a cash basis and investments depreciate faster. That is a cash-flow benefit, not a rate cut.

Incentives

• Border regions. The northern and southern border strips get an ISR credit that brings the effective rate to 20% and a VAT stimulus that produces an effective 8%. Note the catch: the latest extension runs only to 31 December 2026, and the multi-year certainty is gone.
• Plan México. The decree of 21 January 2025 allows immediate depreciation of new fixed assets (41-91% for investments in 2025-2026) plus an additional 25% deduction on the increase in training and innovation spend. It runs to 30 September 2030, but the total budget is capped at 30 billion MXN and allocated by a committee, so the relief is applied for, not automatic.
• IMMEX and maquiladora. A separate export-processing regime with VAT deferral and transfer pricing safe harbours.

RFC registration and e.firma setup for a new entity are covered under our company registration service.

VAT in Mexico: 16%, 8% and 0%

The standard IVA rate is 16%. There is no registration threshold: the obligation arises on the first taxable transaction regardless of turnover. Even a RESICO sole trader with 200,000 MXN of annual revenue must charge and report VAT.

The difference between zero-rating and exemption matters: at 0% input VAT is recoverable, under an exemption it is not and lands in your cost base.

Reporting is monthly: return and payment by the 17th of the following month, plus the DIOT report on transactions with counterparties. VAT refunds exist but are reviewed slowly and strictly, so exporters should budget for the cash gap.

Foreign digital service providers register in Mexico and charge 16% on sales to Mexican consumers. From 2026 digital platforms must also withhold ISR and VAT on their users' transactions and share the data with the SAT, with access blocking as the penalty for non-compliance.

There is also a withholding mechanism: a company paying services or rent to an individual withholds two thirds of the VAT (10.6667%) and 10% ISR and remits both directly.

Social contributions: IMSS, INFONAVIT and payroll tax

Contributions are calculated on the base contribution salary (SBC), meaning the wage plus regular allowances. The base is capped at 25 UMA per day, that is 2,932.75 MXN a day in 2026, around 89,155 MXN a month. Anything above that is not charged.

All in, an employer spends roughly 25-32% on top of the wage, with the exact figure driven by salary level, occupational risk class and state. The employee gives up about 2.5-2.7%, one of the lightest employee loads in the region. The weight sits with the company.

The employer CEAV rate is scheduled to keep rising until 2030 under the pension reform, so headcount costs will grow every year independently of inflation.

State payroll tax

On top of contributions each state charges impuesto sobre nóminas, from 2% to roughly 4.25% of gross payroll. Mexico City is at 4%, Nuevo León and Jalisco at 3%. The employer pays it, monthly, by the 17th.

Self-employed people and sole traders are not required to enrol in IMSS: mandatory social insurance in Mexico is tied to an employment contract. Voluntary enrolment is possible. The flip side of that freedom is that an uninsured freelancer has no state healthcare and no pension savings.

Capital taxes: shares, dividends, property, inheritance

Mexico has no separate capital gains tax for individuals: gains go into general income and are taxed on the progressive scale. The exceptions are narrow and specific.

• Shares through the Mexican exchange. 10% on the net annual result, final. Losses carry forward 10 years but only offset the same type of gain.
• Foreign shares and offshore brokers. Gains enter the general base and are taxed at up to 35%. Residents must report foreign accounts and structures, and the REFIPRE rules pull income from companies in low-tax jurisdictions into the base before any distribution.
• Dividends. The company withholds an extra 10% on payments to individuals and non-residents out of profits earned from 2014 onwards. That tax is final and cannot be credited. A resident also grosses the dividend up in the annual return and credits the corporate ISR already paid.
• Bank interest. The bank withholds an advance at 0.90% a year, applied not to the interest but to the average capital balance. That is close to double the 2025 rate of 0.50%. The annual return taxes the real interest, that is nominal less inflation, and the amount withheld is credited or refunded.

Real estate

• On purchase the buyer pays ISAI, the property acquisition tax, set by states and municipalities at 2% to roughly 5.7%. The base is the highest of three figures: the transaction price, the cadastral value or an appraisal. Most states sit near 2-3%; Mexico City uses a progressive scale. With notary, appraisal and registration, closing costs usually total 4-8% of the price.
• Annually there is predial, the municipal property tax. It is traditionally low in Mexico, often a fraction of a percent of cadastral value, and many municipalities discount early payment.
• On sale the notary withholds ISR. A resident can exempt the sale of their own home if the price does not exceed 700,000 UDIs, roughly 6.2 million MXN at 2026 rates. The limit applies to the price, not the gain, and the relief is available once every three years.

Inheritance, gifts and wealth

Mexico has no inheritance tax, no gift tax and no wealth tax. Inheritances are fully exempt from ISR, and so are gifts between spouses and in the direct ascending and descending line. Gifts between siblings or unrelated people are taxable above a small allowance.

One formality catches people out: if total annual income exceeded 500,000 MXN, inheritances, gifts and loans received must be disclosed in the annual return. Omit them and the SAT can reclassify them as taxable income.

Are there any reliefs for newcomers, expats or retirees

Let us be direct: Mexico has no special tax regime for new residents. No non-dom status, no remittance basis, no expat holiday, no reduced rate for pensioners, no digital nomad carve-out. The moment you become a tax resident you are taxed on worldwide income under the ordinary rules, from day one, with no transition period.

What works instead of a preferential regime:

• RESICO for entrepreneurs. 1-2.5% on turnover up to 3.5 million MXN is one of the lowest effective rates anywhere among ordinary, non-offshore regimes, and it is fully open to a foreigner with residency and an RFC.
• No residency until a home appears. While you have no permanent dwelling in Mexico and your centre of interests stays abroad, long stays alone do not create residency. It is a rare construction globally, but relying on it blindly is risky: a year-long apartment lease may already qualify as casa habitación.
• Pension exemption up to 15 UMA per day. Pension income above the cap is declared on the general scale, and foreign pensions are handled by treaty where one exists.
• Border incentives and Plan México are business reliefs, not personal ones.

On visas, one point matters: residente temporal or permanente status gives you the right to live in the country, but your tax status is decided by the Article 9 test, not by the visa. The reverse is also true - you can become a Mexican tax resident with no residence permit at all.

To compare the burden with jurisdictions that do offer newcomer regimes, see our overview of taxes in Europe in 2026, and the full country-by-country breakdown in the taxes by country section.

Filing, deadlines and penalties

Mexican compliance is fully electronic and built around the CFDI, the digital invoice registered with the SAT at the moment it is issued. Operating without an e.firma and an active Buzón Tributario is not possible.

A mandatory audit is rare in Mexico: the threshold is very high and only large groups and listed companies fall under it. A voluntary dictamen fiscal is available above 157,785,270 MXN of income or 124,650,380 MXN of assets, and some companies choose it for the softer audit treatment it brings. We handle reporting and audit under our audit and reporting service.

Penalties. A missed return corrected voluntarily costs 1,810 to 22,400 MXN; if the SAT gets there first, up to 44,790 MXN. Failing to file mandatory electronic reports costs 20,790 to 41,590 MXN per obligation. On top come surcharges and inflation indexation of the debt, with the instalment surcharge rate at 1.38% per month.

Honestly about the load: the ISR scale itself is not the heaviest, but administration is among the most demanding in Latin America. A CFDI for every transaction, monthly returns, DIOT, electronic accounting and constant reconciliation mean an accountant is a condition of doing business, not an option. From 2026 the SAT has tightened digital oversight and data sharing with platforms further.

Double taxation: Russia and the CIS

Mexico has around 60 double tax treaties in force, including the United States, Canada, Spain, the United Kingdom, Germany, China, Japan, the UAE and most of Latin America.

Russia. The treaty was signed in 2004 and remains in force in 2026. Its maximum source-country rates are 10% on dividends, 10% on interest and 10% on royalties. Mexico is not on the list of unfriendly states that led Russia to suspend articles of certain treaties, so this one applies in full.

CIS countries. Mexico has a treaty with Ukraine. It has none in force with Kazakhstan, Belarus, Armenia, Azerbaijan, Georgia, Uzbekistan or Kyrgyzstan, so payments to those countries carry domestic withholding rates from the non-resident table above, and relief depends entirely on the recipient country's own rules. Check the current list on the SAT portal before closing any transaction, as it changes periodically.

How the foreign tax credit works

A Mexican resident can credit foreign tax paid against Mexican ISR on the same income, subject to limits:

• the credit cannot exceed the Mexican tax attributable to that specific foreign income;
• the calculation is done separately by type of income and by country, not as one pooled figure;
• unused credit carries forward for 10 years;
• dividends from a foreign subsidiary may qualify for an indirect credit of the underlying corporate tax where the shareholding meets the minimum;
• documentation is required: proof of payment and a residency certificate.

For a foreign recipient to apply a reduced treaty rate, they must give the Mexican payer a tax residency certificate for the relevant year; otherwise the domestic rate is withheld. Mexico participates in automatic exchange of financial information under CRS, so the SAT sees residents' foreign accounts.

Worked examples

The numbers below are indicative rather than a calculation for any specific case: occupational risk class, state and pay structure all move the result.

Employee on 30,000 MXN a month

Roughly the level of a skilled specialist in a major city.

• ISR: the income falls in the 17,533.64 - 35,362.83 MXN bracket. 1,856.84 + 21.36% of (30,000 - 17,533.63) gives about 4,520 MXN.
• Employee IMSS contributions: around 800 MXN, depending on the integration factor.
• Take-home: about 24,700 MXN. The effective burden on the employee is roughly 17.7%.

On top of that the employer pays about 7,000 MXN of IMSS and INFONAVIT contributions plus 900 MXN of payroll tax at a 3% state rate. Total cost of the employee is around 37,900 MXN. The gap between what the company spends and what the person receives is about 35%.

Sole trader on RESICO with 1,500,000 MXN of annual revenue

• RESICO: 2.0% on receipts, so 30,000 MXN of ISR for the year. Expenses are not deductible, but they are also not needed.
• General regime with 300,000 MXN of expenses: base 1,200,000 MXN, ISR = 125,485.07 + 30% of (1,200,000 - 668,840.14), about 284,800 MXN.
• Almost a nine and a half times difference in favour of RESICO.

The break-even point sits at expenses of roughly 84% of revenue; only above that does the general regime win. For consulting, development, design and most services RESICO is the better answer almost every time. Separately the trader charges clients 16% VAT: neutral for business clients, a real price increase for consumers.

Company with 5,000,000 MXN of profit

• ISR at 30% - 1,500,000 MXN.
• PTU at 10% to employees - up to 500,000 MXN, deductible the following year.
• Distributing the remainder to an individual shareholder - another 10% withheld on the dividend.

Total burden on distributed profit lands near 37%. That is noticeably higher than Eastern Europe or Cyprus, and it is the main argument against holding a pure holding or service structure in Mexico when the operations are not physically tied to the country. Mexico works well for a real on-the-ground business and for a micro-entrepreneur on RESICO, but not as a tax optimisation jurisdiction.

What matters about taxes in Mexico

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