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Taking profits and capital out of Mexico: dividends, capital reductions and branch remittances

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Last verified: 2026-10-26 · Status: Stable

Profits can leave Mexico as dividends once the shareholders approve the financial statements, past losses are covered and the 5 percent legal reserve is set aside; capital can come back through a capital reduction. On a dividend to a foreign shareholder the company withholds 10 percent (5 or 0 percent for qualifying US parents under the treaty), and if the profit was not already taxed (outside the CUFIN account) the company also pays 30 percent on the grossed up amount, about 42.86 percent of the dividend. A capital reduction is tax free only up to the restated contributed capital (CUCA) per share; anything above it is distributed profit, and creditors can oppose a reduction in court.

USD conversions use MXN 18.5026 per US dollar, the US Federal Reserve H.10 noon buying rate in New York for 16 October 2026 (FRED series DEXMXUS), the latest observation available when this page was verified. Legal and tax conversions in Mexico use the Banxico FIX published in the DOF, which differs slightly. Conversions are for orientation only.

Key facts

Withholding tax on dividends paid to foreign residents (domestic rate, profits from 2014)	10 %LISR art. 164, section I, as of 2026-10-26 · in force
Company level tax on dividends not paid from CUFIN (30 percent times 1.4286)	42.86 % of dividendLISR art. 10, as of 2026-10-26 · in force
Gross up factor for dividends outside the net tax profit account	1.4286 factorLISR arts. 10 and 78, as of 2026-10-26 · in force
US treaty maximum withholding on dividends	0 (qualifying 80 percent parents), 5 (10 percent voting stock), 10 (other) %US and Mexico convention art. 10 as amended by the 2002 protocol, as of 2026-10-26 · in force
Argentina treaty maximum withholding on dividends	10 (company holding at least 25 percent), 15 (other) %Argentina and Mexico agreement art. 10, approved by Ley 27.334, as of 2026-10-26 · in force
Minimum annual allocation of net profit to the legal reserve	5 %LGSM art. 20, as of 2026-10-26 · in force
Legal reserve required until it reaches	20 % of share capitalLGSM art. 20, as of 2026-10-26 · in force
Dividends to foreign shareholders need an FX authorization	No authorization in the rules cited; 10 percent withholding applies LISR art. 164; Ley Monetaria art. 8, as of 2026-10-26 · in force
Creditor objection period on a capital reduction	From the resolution until 5 days after the last publication LGSM art. 9, as of 2026-10-26 · in force

The rule

1. When profits can be paid out. Profits may be distributed only after the shareholders' meeting has approved the financial statements showing them, and not while losses of prior years remain unrestored or unabsorbed or the capital has not been reduced; contrary agreements have no effect, and both the company and its creditors can claw back improper distributions from recipients and from the directors who paid them, jointly. Every company except the S.A.S. must first set aside at least 5 percent of net profit each year for the legal reserve until it reaches one fifth of share capital, and must rebuild it if it falls.
Cost to do it: No government fee under the rules cited; the cost is internal (approved financial statements and a shareholders' meeting).
Example: A subsidiary with capital of MXN 1,000,000 and net profit of MXN 2,000,000 must allocate at least MXN 100,000 (5 percent) to the legal reserve until the reserve reaches MXN 200,000, before distributing the rest. / On about USD 108,093 of profit, at least about USD 5,405 goes to the legal reserve.Ley General de Sociedades Mercantiles (LGSM), DOF 4 August 1934 (Chamber of Deputies consolidated text, last reform DOF 20 October 2023), Arts. 18, 19 and 20 (art. 20 reformed DOF 14 March 2016), 2016-03-14 official text · verified 2026-10-26

2. Dividends from already taxed profits carry no extra corporate tax. Companies distributing dividends pay corporate tax on them at the 30 percent rate on the dividend multiplied by 1.4286, unless the dividends come from the net tax profit account (CUFIN). The tax is in addition to the year's corporate tax, is final, and is due by the 17th of the month after payment. It can be credited against the corporate tax of the year it is paid and the next two years; any amount not credited when possible is lost.
Cost to do it: Outside CUFIN: 30 percent of 1.4286 times the dividend, about 42.86 percent of the dividend, creditable over three years.
Example: A dividend of MXN 1,850.26 paid outside CUFIN costs the company MXN 792.98 of corporate tax (1,850.26 times 1.4286 times 30 percent). / On USD 100 of dividend outside CUFIN, about USD 42.86 of company level tax.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Arts. 10 and 77, 2013-12-11 official text · verified 2026-10-26

3. 10 percent withholding on dividends to foreign shareholders, cut by treaties. A Mexican company distributing dividends or profits to foreign residents must withhold 10 percent, give the recipient a statement of the amount and tax withheld, and pay the tax with the month's provisional payment; the tax is final. The 10 percent tax applies to profits generated from 2014 onward. Under the Mexico and United States convention as amended by the 2002 protocol, Mexico may tax dividends beneficially owned by a US company owning directly at least 10 percent of the voting stock at no more than 5 percent and other dividends at no more than 10 percent, and may not tax them at all when the US company has held 80 percent or more of the voting stock for the 12 months ending on the declaration date and meets the protocol's limitation on benefits tests. The Argentina and Mexico agreement caps the rate at 10 percent for companies owning at least 25 percent of the capital and 15 percent otherwise, so it gives no relief below the domestic 10 percent; for the Argentine side see The Argentine Thread guide.
Cost to do it: Per USD 100 of dividend: 10 percent domestic (USD 10); 5 percent for a 10 percent US corporate holder (USD 5); 0 percent for a qualifying 80 percent US parent.
Example: A dividend of MXN 1,850.26 from post 2014 CUFIN profits to a foreign parent: MXN 185.03 withheld at 10 percent, MXN 92.51 at 5 percent, nothing at 0 percent. / USD 100 dividend: net USD 90 at 10 percent, USD 95 at 5 percent, USD 100 at 0 percent.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024); Protocol amending the United States and Mexico convention, signed 26 November 2002; Argentina and Mexico agreement signed 4 November 2015, LISR art. 164, section I; LISR transitional provisions for 2014, Artículo Noveno, section XXX; US convention art. 10, paragraphs 2 and 3 (2002 protocol art. II); Argentina agreement art. 10, paragraph 2, 2013-12-11 official text · verified 2026-10-26

4. Returning capital: the CUCA test. When a Mexican company reduces its capital, the refund per share minus the restated contributed capital account (CUCA) balance per share is distributed profit. That profit can come out of CUFIN up to the CUFIN share of the redeemed shares; any part not covered by CUFIN bears corporate tax at 30 percent on the amount times 1.4286. A second test treats as distributed profit the excess of book equity (per the balance sheet approved for the reduction) over the CUCA balance, less the profit already computed under the first test. The same rules apply on liquidation and on share buybacks charged to capital, with a 5 percent buyback exception for shares replaced within a year. Section I of LISR art. 164 applies to the profit computed under art. 78 on a reduction and imposes the 10 percent withholding on dividends to foreign residents covered by that section.
Cost to do it: Tax free up to restated CUCA per share. Above that: no corporate tax if covered by CUFIN, otherwise about 42.86 percent of the excess at company level, plus 10 percent withholding before treaty relief.
Example: A company with 1,000,000 shares and CUCA of MXN 30,000,000 (MXN 30 per share) redeems 500,000 shares for MXN 18,502,600 (MXN 37.0052 per share). Distributed profit is MXN 3,502,600. If not covered by CUFIN, corporate tax is MXN 1,501,144.31; 10 percent withholding is MXN 350,260. / USD 1,000,000 returned; about USD 189,303 is distributed profit; up to about USD 81,132 of corporate tax if outside CUFIN, plus about USD 18,930 withheld.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Arts. 78 and 164, section I, 2013-12-11 official text · verified 2026-10-26

5. Capital reductions need creditor clearance. A reduction of share capital by refund to shareholders, or by releasing unpaid subscriptions, must be published in the Ministry of Economy's electronic publication system. Creditors may oppose it in court, separately or jointly, from the day the company resolves it until five days after the last publication, and the reduction is suspended until the opposing creditors are paid or secured to the court's satisfaction or the opposition is finally dismissed. In a variable capital company, the variable part can be withdrawn under the variable capital chapter without those formalities, within the limits in the bylaws.
Cost to do it: Fixed capital reduction: shareholders' meeting, bylaw amendment and notarization, publication, and a waiting period for creditor objections. Variable capital withdrawal: shareholders' resolution under the bylaws.
Example: A subsidiary wants to return MXN 18,502,600 of capital. If the amount sits in variable capital, it can resolve the withdrawal under its bylaws; if in fixed capital, it must publish the reduction and wait out the creditor objection period. / About USD 1,000,000 returned.Ley General de Sociedades Mercantiles (LGSM), DOF 4 August 1934 (Chamber of Deputies consolidated text, last reform DOF 20 October 2023), Arts. 9 (reformed DOF 13 June 2014) and 213, 2014-06-13 official text · verified 2026-10-26

6. Branch profits sent to head office. Profits in cash or in kind that a permanent establishment of a foreign company sends to its head office or another establishment abroad, to the extent they do not come from its own CUFIN or its capital remittance account, are taxed at the 30 percent corporate rate on the amount multiplied by 1.4286, paid by the establishment.
Cost to do it: Outside CUFIN and capital remittance account: about 42.86 percent of the remittance at branch level.
Example: A branch remits MXN 1,850,260 of profits already in its CUFIN: no additional tax under section II. The same remittance outside both accounts would cost MXN 792,984.43. / About USD 100,000 remitted; up to about USD 42,858 of branch level tax if outside both accounts.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Art. 164, section II, 2013-12-11 official text · verified 2026-10-26

Route	Company level tax	Withholding	Net to parent	Rule
Dividend from CUFIN, non treaty parent	0	USD 10	USD 90	LISR arts. 10 and 164
Dividend from CUFIN, US parent with 10 percent of votes	0	USD 5	USD 95	US convention art. 10(2)(a)
Dividend from CUFIN, qualifying US parent with 80 percent for 12 months	0	0	USD 100	US convention art. 10(3)(a)
Dividend outside CUFIN, non treaty parent	USD 42.86 (creditable over 3 years)	USD 10	USD 90	LISR arts. 10 and 164
Dividend from CUFIN, Argentine parent with 25 percent	0	USD 10 (treaty cap 10 percent equals domestic rate)	USD 90	Argentina agreement art. 10(2)
Capital reduction up to CUCA per share	0	0	USD 100	LISR art. 78

USD 100 of profit sent from a Mexican subsidiary to a foreign parent, by route, verified 26 October 2026. Company level tax assumes the profit is outside CUFIN only where stated.

Worked example

A Mexican subsidiary of a US company closes 2026 with MXN 18,502,600 (about USD 1,000,000) of accounting profit, all of it already taxed and in its post 2014 CUFIN, no accumulated losses and a legal reserve already at one fifth of capital.
The annual shareholders' meeting approves the 2026 financial statements and declares a dividend of MXN 18,502,600 (LGSM art. 19).
Because the dividend comes from CUFIN, no company level tax applies (LISR art. 10). The US parent has held 100 percent of the voting stock for more than 12 months and meets the protocol's limitation on benefits test, so Mexican withholding is 0 under US convention art. 10(3); with only 10 percent of the votes it would be 5 percent, MXN 925,130 (USD 50,000).
Without treaty benefits the subsidiary would withhold 10 percent, MXN 1,850,260 (USD 100,000), pay it with the month's provisional payment and issue the withholding statement (LISR art. 164).
Two years later the parent wants back USD 1,000,000 of its original capital. If the restated CUCA per share covers the refund per share, the return is tax free under LISR art. 78; the company resolves the variable capital withdrawal under its bylaws rather than publishing a fixed capital reduction (LGSM arts. 9 and 213).

Step by step

1. Each year, reconcile CUFIN (split pre 2014 and from 2014), CUCA and accumulated losses before proposing a distribution.
2. Hold the annual meeting: approve the financial statements, allocate the legal reserve and declare the dividend (LGSM arts. 19 and 20).
3. Gather the parent's tax residence certificate and check the treaty rate and its conditions (for the US, the 12 month 80 percent holding and limitation on benefits tests).
4. Pay the dividend: withhold, issue the withholding statement and electronic tax receipt, pay the withholding with that month's provisional payment, and pay any company level tax on non CUFIN dividends by the 17th of the next month (LISR arts. 10 and 164).
5. Wire the net amount in pesos or dollars from the company's accounts; no exchange authorization is required under the rules on this page.
6. For a return of capital, compute CUCA per share at the payment date, run both tests in LISR art. 78, and use the variable capital route or publish the fixed capital reduction and wait for the creditor objection period (LGSM art. 9).
7. Report the retention or distribution of profits and the capital withdrawal in the RNIE quarterly report if above the Commission threshold (RLIE art. 38, section II).

Common traps

Paying an interim dividend before the financial statements are approved or while prior losses are unabsorbed. LGSM art. 19 lets the company and its creditors claw it back from recipients and directors.
Forgetting the S.A. legal reserve. Every company type except the S.A.S. must set aside 5 percent of net profit each year until the reserve reaches one fifth of capital (LGSM art. 20).
Paying from profits outside CUFIN without budgeting the company level tax of about 42.86 percent of the dividend, and then failing to credit it within the two following years, which forfeits the credit (LISR art. 10).
Assuming the Argentina treaty lowers dividend withholding. Its caps are 10 and 15 percent, so the domestic 10 percent remains the operative rate.
Treating every capital return as tax free. Only the restated CUCA per share comes back free; the excess, and the book equity test in LISR art. 78, section II, can create distributed profit.
Reducing fixed capital without publication. Creditors can oppose until five days after the last publication and the reduction is suspended meanwhile (LGSM art. 9).

Sources

Related: Mexico country profile · live dashboard · central bank and release calendar · our posts on X · where Argentina is involved, see The Argentine Thread guide

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