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Mexico state and municipal taxes: payroll tax, property tax, real estate transfer tax and the limits set by federal coordination

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

Beyond federal taxes, Mexican states levy a payroll tax on wages paid in their territory and municipalities levy property tax (predial) and real estate transfer tax (ISAI); rates are set by each state's law, so a plant in Nuevo León and an office in another state can face different costs. States that receive federal revenue sharing agree not to tax activities subject to VAT (except lodging), company assets, profits or capital, or interest and financial instruments, but they may levy cedular taxes of 2 to 5 percent on certain individual income. Example: Nuevo León's laws set a 3 percent payroll tax, a 3 percent real estate transfer tax on the higher of price and cadastral value, and an annual property tax of 2 per thousand (plus 1 per thousand for commercial and industrial property).

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. Mexican tax law uses the Banxico FIX for foreign currency amounts, which differs slightly. Conversions are for orientation only.

Key facts

State level sales or corporate income tax in coordinated states	No (prohibited by the federal coordination agreements, except lodging) LIVA art. 41, as of 2026-10-26 · in force
Permitted range for state cedular tax on professional services income	2 to 5 %LIVA art. 43, as of 2026-10-26 · in force
State payroll tax rate, Nuevo León	3 %Ley de Hacienda del Estado de Nuevo León art. 157, as of 2026-10-26 · in force
Real estate acquisition tax (ISAI), Nuevo León municipalities	3 %Ley de Hacienda para los Municipios del Estado de Nuevo León art. 28 bis, as of 2026-10-26 · in force
Annual property tax (predial), Nuevo León, general rate	2 per thousandLey de Hacienda para los Municipios del Estado de Nuevo León art. 21 bis-8, as of 2026-10-26 · in force

The rule

1. Municipalities collect property taxes. Municipal finances include the contributions, including additional rates, that state legislatures establish on real property, its subdivision, division, consolidation, transfer and improvement, and on changes in property value. Property tax and real estate transfer tax are therefore set by each state's congress for its municipalities and collected locally, and rates vary by state and municipality.
Cost to do it: Varies by location; see the Nuevo León example below.
Example: A company buying a warehouse must check the transfer tax and annual property tax of the specific municipality before closing. / On a USD 5 million warehouse, a 3 percent transfer tax means USD 150,000 at closing.Constitución Política de los Estados Unidos Mexicanos (CPEUM), DOF 5 February 1917 (Chamber of Deputies consolidated text, last reform DOF 7 October 2026), Art. 115, section IV, paragraph a), 1917-02-05 official text · verified 2026-10-26

2. What states and municipalities may not tax. States that adhere to the National Fiscal Coordination System to receive federal revenue sharing agree not to keep local or municipal taxes on: acts or activities subject to VAT or the consideration for them (except lodging, camping, trailer park and timeshare services); exports or 0 percent rated sales; the assets, profits or capital of companies (except taxes on owning or using cars, buses, trucks, aircraft, vessels and similar vehicles); and interest, credit instruments, derivatives and their returns. This is why there is no state level sales tax or corporate income tax in Mexico.
Cost to do it: None; it caps the local tax burden on businesses.
Example: A retailer in any coordinated state charges only federal VAT on its sales; the state cannot add a local sales tax. / No state sales tax on a USD 100 sale; only the 16 percent federal VAT.Ley del Impuesto al Valor Agregado (LIVA), DOF 29 December 1978 (Chamber of Deputies consolidated text, last reform DOF 12 November 2021), Art. 41, 1978-12-29 official text · verified 2026-10-26

3. State cedular taxes on individuals. States may levy cedular income taxes on individuals who earn income from professional services, leasing real estate, selling real estate or business activities, without breaching the coordination agreements; for professional services the rate must be between 2 and 5 percent of the profit attributable to the fixed base located in the state. Federal law also lets employers subtract local taxes on salaries of up to 5 percent when computing federal wage withholding (LISR art. 96).
Cost to do it: 2 to 5 percent of the relevant profit where a state has adopted such a tax.
Example: An individual consultant with an office in a state that adopted a 3 percent cedular tax on professional services earns a profit of MXN 1,000,000 there and pays MXN 30,000 of state tax, in addition to federal income tax. / Profit of about USD 54,046; state tax of about USD 1,621 at 18.5026.Ley del Impuesto al Valor Agregado (LIVA), DOF 29 December 1978 (Chamber of Deputies consolidated text, last reform DOF 12 November 2021), Art. 43, 1978-12-29 official text · verified 2026-10-26

4. Interaction of local salary taxes with federal withholding. Employers that withhold a local tax on salaries must deduct it from the employee's monthly income when computing federal wage withholding, provided the local tax rate does not exceed 5 percent.
Cost to do it: Reduces the federal withholding base by the local tax.
Example: An employee earns MXN 50,000 a month and a local salary tax of 2 percent (MXN 1,000) is withheld; federal withholding is computed on MXN 49,000. / Monthly salary of about USD 2,702; local tax of about USD 54 at 18.5026.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Art. 96, 2013-12-11 official text · verified 2026-10-26

5. Example: Nuevo León payroll tax of 3 percent. Nuevo León taxes payments in cash, services or kind for subordinate personal work performed in the state, including overtime, bonuses, commissions, savings fund contributions, year end bonus and pay to directors, managers and board members, and fees paid to individuals who work mainly for one client without charging VAT. The tax is 3 percent of total payments and is paid by the 17th of the following month. Other states set their own rates.
Cost to do it: 3 percent of payroll in Nuevo León.
Example: A Monterrey plant with a monthly payroll of MXN 5,000,000 pays MXN 150,000 of state payroll tax by the 17th of the following month. / Monthly payroll of about USD 270,232; payroll tax of about USD 8,107 at 18.5026.Ley de Hacienda del Estado de Nuevo León, Periódico Oficial 28 December 1974 (text published by the Nuevo León State Congress, last reform listed P.O. 25 January 2023), Arts. 154 to 158 (state law), 1974-12-28 official text · verified 2026-10-26

6. Example: Nuevo León real estate transfer tax and property tax. Buyers of land or buildings in Nuevo León pay real estate acquisition tax (ISAI) at 3 percent of the taxable value, which is the higher of the transaction value and the cadastral value; first homes of modest value for individuals get a reduction. Annual property tax (predial) is 2 per thousand of the tax base, plus 1 per thousand for buildings used for commercial, industrial, service or other non residential purposes, and plus 2 per thousand for vacant lots (1 per thousand outside the main metropolitan municipalities or for small lots of owners with no other property).
Cost to do it: 3 percent of value at purchase; 3 per thousand a year for commercial and industrial property.
Example: A company buys an industrial building in Apodaca for MXN 80,000,000 (cadastral value MXN 60,000,000). ISAI is MXN 2,400,000. If the property tax base is MXN 60,000,000, annual predial is MXN 180,000 (3 per thousand). / Purchase of about USD 4,323,717; ISAI of about USD 129,712 and annual predial of about USD 9,728 at 18.5026.Ley de Hacienda para los Municipios del Estado de Nuevo León, Periódico Oficial 28 December 1974 (text published by the Nuevo León State Congress, last reform listed P.O. 25 January 2023), Arts. 28 bis and 21 bis-8 (municipal law), 1974-12-28 official text · verified 2026-10-26

Tax	Levied by	Base	Nuevo León rate
Payroll tax (impuesto sobre nóminas)	State	Payments for subordinate work in the state	3 percent, monthly by the 17th
Real estate acquisition tax (ISAI)	Municipality under state law	Higher of price and cadastral value	3 percent
Property tax (predial)	Municipality under state law	Property tax base	2 per thousand a year, plus 1 for non residential, plus 2 for vacant lots
Cedular income tax on individuals	State, optional	Professional, rental, real estate or business profit of individuals	Set by each state that adopts it; 2 to 5 percent range for professional services under LIVA art. 43

Main subnational taxes for businesses in Mexico, with Nuevo León rates as an example, verified 26 October 2026

Worked example

A foreign manufacturer opens a plant in Nuevo León with 400 employees and a monthly payroll of MXN 8,000,000 (about USD 432,372).
It pays state payroll tax of MXN 240,000 a month (about USD 12,971), on top of federal social security contributions covered on the payroll taxes page.
It bought the plant for MXN 150,000,000 (about USD 8.1 million) and paid ISAI of MXN 4,500,000 at closing; annual predial on a MXN 100,000,000 base is MXN 300,000 at 3 per thousand for industrial use.
There is no state sales tax or state corporate income tax, because Nuevo León, like the other states, participates in federal revenue sharing.

Step by step

1. List every state where employees will work; register with each state treasury for payroll tax.
2. Look up the payroll tax rate and incentives in each state's treasury law (or for Mexico City, its Fiscal Code) before choosing a location.
3. For real estate purchases, budget ISAI on the higher of price and cadastral value and confirm the municipality's property tax rates.
4. File and pay state payroll tax monthly (by the 17th in Nuevo León).
5. Check state incentive programs for new investment, which can reduce payroll tax in some states.

Common traps

Assuming one national rate. Payroll, property and transfer taxes are set state by state; rates and bases differ.
Using the contract price for transfer tax. In Nuevo León the base is the higher of price and cadastral value (municipal treasury law art. 28 bis).
Forgetting fees to individuals. In Nuevo León, fees paid to individuals who work mainly for one client without charging VAT are subject to payroll tax (state treasury law art. 154).
Relying on an old copy of a state law. State laws change every December with the next year's budget; check the current text before relying on a rate.

Sources

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