Countries › Mexico › Guide › 6. Taxes › Mexico business taxes at a glance: the 30 percent corporate tax, withholding on payments abroad, 16 percent VAT and the rules that cap deductions

Mexico business taxes at a glance: the 30 percent corporate tax, withholding on payments abroad, 16 percent VAT and the rules that cap deductions

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

A Mexican company pays income tax at 30 percent of its taxable result, makes monthly advance payments by the 17th of the following month and files its annual return within three months of year end; losses carry forward ten years. Payments to foreign residents carry final withholding: 10 percent on dividends, 4.9 to 21 percent on most interest and 25 percent on most royalties and technical assistance, before any treaty relief, while interest deductions are capped by a 3 to 1 related party debt to equity test and a 30 percent of adjusted tax profit test. VAT is 16 percent, filed monthly; foreign digital service providers must register and charge it, and businesses in the northern and southern border regions can apply 8 percent VAT and a one third income tax credit under a decree in force until 31 December 2026.

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

Corporate income tax rate	30 %LISR art. 9, as of 2026-10-26 · in force
Corporate annual return due	Within three months after year end (31 March for calendar year companies) LISR art. 9, as of 2026-10-26 · in force
Corporate advance tax payments	Monthly, by the 17th of the following month LISR art. 14, as of 2026-10-26 · in force
Tax loss carryforward period	10 yearsLISR art. 57, as of 2026-10-26 · in force
Tax loss carryback allowed	No LISR art. 57, as of 2026-10-26 · in force
Thin capitalization limit (debt with foreign related parties)	3:1 ratioLISR art. 28, section XXVII, as of 2026-10-26 · in force
Net interest deduction cap as a share of adjusted tax profit	30 %LISR art. 28, section XXXII, as of 2026-10-26 · in force
Interest expense above which the 30 percent cap applies (shared by the group)	20000000 MXNLISR art. 28, section XXXII, as of 2026-10-26 · in force
Withholding tax on dividends paid to foreign residents (domestic rate, before treaties; profits from 2014 onward)	10 %LISR art. 164, section I, as of 2026-10-26 · in force
Withholding tax on interest paid to foreign residents (domestic rates, before treaties)	4.9, 10, 15 or 21 by type; top marginal individual rate on other interest %LISR art. 166, as of 2026-10-26 · in force
Withholding tax on royalties and technical assistance paid to foreign residents (general domestic rate)	25 %LISR art. 167, section II, as of 2026-10-26 · in force
Related party transactions information return due	15 May of the following year LISR art. 76, section X, as of 2026-10-26 · in force
VAT standard rate	16 %LIVA art. 1o., as of 2026-10-26 · in force
VAT filing and payment	Monthly, by the 17th of the following month LIVA art. 5o.-D, as of 2026-10-26 · in force
Foreign digital service providers must register and charge VAT	Yes; register within 30 days, 16 percent, monthly by the 17th LIVA art. 18-D, as of 2026-10-26 · in force
Reduced VAT rate in the northern and southern border regions (incentive decree)	8 %Decreto de estímulos fiscales región fronteriza norte, art. Décimo Primero; extended to 31 December 2026 by decree DOF 31 December 2025, as of 2026-10-26 · in force
Income tax credit in the border regions (share of tax due)	One third Decreto de estímulos fiscales región fronteriza norte, DOF 31 December 2018, extended to 31 December 2026, as of 2026-10-26 · in force
Mexico and Argentina double tax agreement entry into force	2017-08-23 dateArgentine approval Ley 27.334, Boletín Oficial 21 December 2016, as of 2026-10-26 · in force
Bill amending the income tax law for 2027	Approved by the Chamber of Deputies and sent to the Senate, where it was turned to the Finance and Legislative Studies committees; not in force until published in the DOF Minuta reforming the LISR, Paquete Económico 2027, as of 2026-10-26 · pending

The rule

1. Corporate income tax is a flat 30 percent, paid monthly in advance and settled annually. Companies (personas morales) apply 30 percent to their taxable result for the year: total taxable income, less authorized deductions and the employee profit share (PTU) paid in the year, less tax losses carried forward. The annual return is due within the three months after the tax year ends, which for a calendar year company means by 31 March. During the year the company makes monthly provisional payments by the 17th day of the following month, calculated by applying the profit ratio (coeficiente de utilidad) of its last twelve month return to its cumulative income for the year.
Cost to do it: 30 percent of the taxable result. Compliance runs through monthly provisional returns and one annual return filed electronically with SAT; there is no filing fee, but in practice a Mexican company needs an outside or in house accountant to keep electronic accounting and invoices (CFDI) current.
Example: A Mexican subsidiary has a taxable result of MXN 10,000,000 for 2026. Its income tax is MXN 3,000,000, less the monthly provisional payments already made, with any balance due with the annual return by 31 March 2027. / Taxable result of about USD 540,465 at 18.5026; tax of about USD 162,139.Ley del Impuesto sobre la Renta (LISR), DOF 11 December 2013 (Chamber of Deputies consolidated text, last reform DOF 1 April 2024), Arts. 9 and 14, 2013-12-11 official text · verified 2026-10-26

2. Tax losses carry forward ten years and are lost if not used when they could be. A tax loss arises when authorized deductions exceed taxable income. It can be offset against taxable profit in the following ten years until used up, and it is restated for inflation. If a company could have applied a loss in a given year and did not, it loses the right to use that amount later. The right to use losses is personal: it cannot be transferred to another person, even in a merger, and in a spin off losses are split between the companies that continue the same line of business. When control of a company with losses changes and its income over the last three years was less than the restated losses, the losses can only be used against profits from the same line of business that produced them.
Cost to do it: No fee. The cost is timing: losses offset tax only within ten years, and an unused loss in a year with profit is forfeited for that amount.
Example: A start up loses MXN 2,000,000 in 2026 and earns a taxable profit of MXN 5,000,000 in 2027. It must apply the restated 2026 loss in 2027 (the last year to use it would be 2036), reducing the 2027 base to about MXN 3,000,000 before inflation restatement, and saving about MXN 600,000 of tax at 30 percent. / Loss of about USD 108,093; tax saving of about USD 32,428 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), Arts. 57 and 58, 2013-12-11 official text · verified 2026-10-26

3. Two caps on interest deductions. First, thin capitalization: interest is not deductible to the extent it arises on debt exceeding three times the company's equity (the average of opening and closing capital contable) where that excess debt is owed to related parties resident abroad. The excess is measured on average monthly balances of all interest bearing debt; if foreign related party debt is larger than the excess, the non deductible part is that interest times the excess divided by the foreign related party debt. Second, net interest (interest expense less interest income) above 30 percent of adjusted tax profit is not deductible. The 30 percent cap only applies when the company's interest expense exceeds MXN 20,000,000 in the year, and that MXN 20,000,000 allowance is shared across all Mexican companies and permanent establishments of the same group or related parties in proportion to their prior year income. The more restrictive result applies, since both are listed as separate non deductible items.
Cost to do it: Non deductible interest raises the tax base; every MXN 1,000,000 of disallowed interest costs MXN 300,000 of income tax at 30 percent.
Example: A Mexican subsidiary has average equity of MXN 100,000,000 and average debt of MXN 400,000,000, all owed to its foreign parent, with interest of MXN 32,000,000. Debt above three times equity is MXN 100,000,000, one quarter of the related party debt, so MXN 8,000,000 of interest is not deductible under the thin capitalization rule, adding MXN 2,400,000 of tax. Because interest also exceeds MXN 20,000,000, the company must separately test net interest against 30 percent of adjusted tax profit. / Debt of about USD 21.6 million against equity of about USD 5.4 million; disallowed interest of about USD 432,372 and extra tax of about USD 129,712 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. 28, sections XXVII and XXXII, 2013-12-11 official text · verified 2026-10-26

4. Related party prices must be at arm's length and documented. Companies that deal with related parties must set income and deductions on those transactions at the prices or margins independent parties would use in comparable transactions, applying the methods in art. 180 in the order the law lists them; otherwise SAT may recalculate them. They must obtain and keep supporting documentation showing this (including the names, tax residence and ownership links of the related parties), and file the information return on related party transactions for the prior calendar year by 15 May of the following year.
Cost to do it: No government fee. The cost is the transfer pricing study and the information return, usually prepared by an outside adviser; ask for a fixed quote per year.
Example: A Mexican distributor buys finished goods from its US parent for MXN 50,000,000 a year. It needs a study showing the price leaves it a margin within the range comparable independent distributors earn, keeps it on file, and reports the transactions by 15 May of the following year. / Purchases of about USD 2.7 million a year 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. 76, sections IX, X and XII; arts. 179 and 180, 2013-12-11 official text · verified 2026-10-26

5. Dividends: 10 percent withholding for foreign shareholders, plus company level tax if the profits were not taxed. A Mexican company paying dividends to individuals or companies resident abroad withholds 10 percent of the dividend as a final tax and gives the recipient a statement of the dividend and tax withheld. Separately, if the dividend is not paid out of the net tax profit account (CUFIN), the company itself pays 30 percent tax on the dividend grossed up by the factor 1.4286. A tax treaty with the shareholder's country can lower the 10 percent rate. For an Argentine shareholder, Mexico and Argentina have a double tax agreement in force since 23 August 2017; see The Argentine Thread guide for the Argentine side.
Cost to do it: 10 percent of the gross dividend before treaty relief, and 30 percent of the grossed up dividend at company level when paid outside CUFIN.
Example: A Mexican subsidiary pays its foreign parent a dividend of MXN 7,000,000 out of CUFIN. It withholds MXN 700,000 and wires MXN 6,300,000, before any treaty reduction. / Dividend of about USD 378,325; withholding of about USD 37,833; net about USD 340,493 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), Arts. 10 and 164, section I, 2013-12-11 official text · verified 2026-10-26

6. Interest and royalties paid abroad: withholding by type. Interest paid to foreign residents is taxed by withholding at 4.9 percent on debt securities placed with the investing public, on credits owed by Mexican banks and on securities placed through banks or brokers in a treaty country with the required notice to the CNBV, and on loans from foreign financing entities in which the Federal Government or Banco de México holds equity; 10 percent on interest paid to foreign banks (including investment banks) and foreign state financing entities that are the beneficial owners and meet SAT information requirements; 15 percent on interest paid to reinsurers; 21 percent on other interest paid by Mexican banks, on supplier credit for machinery and equipment and on related financing; and the top marginal individual rate of art. 152 on all other interest, which captures most related party loans. The 4.9 and 10 percent rates do not apply where the beneficial owners receiving more than 5 percent of the interest hold more than 10 percent of the debtor's voting shares or are companies more than 20 percent owned by the debtor. Royalties and technical assistance paid abroad are taxed on the gross payment at 25 percent in general, at 5 percent for rental of railway cars, certain temporarily imported containers and trailers and licensed vessels, at 1 percent for licensed commercial aircraft, and at the top marginal individual rate of art. 152 for patents, trademarks, trade names and advertising. Treaties often reduce these rates.
Cost to do it: The withholding rate on the gross payment, with no deductions, before treaty relief. The Mexican payer must withhold it from the payment and pay it over to SAT.
Example: A Mexican company pays MXN 1,000,000 of fees for technical assistance to a foreign affiliate. Without treaty relief it withholds MXN 250,000 (25 percent) and remits MXN 750,000. / Payment of about USD 54,046; withholding of about USD 13,512 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), Arts. 166 and 167, 2013-12-11 official text · verified 2026-10-26

7. VAT is 16 percent, filed monthly. VAT applies to sales of goods, independent services, leasing of goods and imports of goods or services carried out in Mexico, at 16 percent of the value. It must be charged expressly and separately to the customer and is never part of the price base. Each month the business pays the difference between VAT charged and creditable VAT paid on its purchases and imports, by the 17th day of the following month. A 0 percent rate applies to the goods and services listed in art. 2o.-A.
Cost to do it: 16 percent of the value, recoverable as a credit by VAT registered businesses that make taxed sales; a cash flow cost until credited or refunded.
Example: A Mexican company invoices services of MXN 1,000,000 and charges MXN 160,000 of VAT (total MXN 1,160,000). It paid MXN 80,000 of VAT on its own purchases that month, so it pays SAT MXN 80,000 by the 17th of the following month. / Invoice of about USD 54,046 plus VAT of about USD 8,647; net VAT due of about USD 4,324 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), Arts. 1o., 2o.-A and 5o.-D, 1978-12-29 official text · verified 2026-10-26

8. Foreign digital service providers must register and charge VAT. Residents abroad without an establishment in Mexico that provide digital services to recipients located in Mexico must register in the Federal Taxpayers Registry (RFC) within 30 calendar days of first providing the service, charge VAT expressly and separately with their price, report monthly the number of services and recipients by type, and calculate and pay 16 percent VAT on amounts actually collected each month by the 17th of the following month. SAT publishes the list of registered providers.
Cost to do it: 16 percent VAT on Mexican sales, collected from customers. No registration fee; the cost is monthly filing, usually through a local adviser.
Example: A foreign software company sells subscriptions to Mexican customers for MXN 500,000 in a month. It charges MXN 80,000 of VAT and pays that amount to SAT by the 17th of the following month. / Sales of about USD 27,023; VAT of about USD 4,324 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), Arts. 18-B and 18-D, 2019-12-09 official text · verified 2026-10-26

9. Northern and southern border regions: 8 percent VAT and a one third income tax credit, currently through 31 December 2026. Under presidential decrees, businesses that sell goods, provide services or lease goods from premises in the northern or southern border region, with delivery or service in that region, can apply an effective 8 percent VAT rate (a credit of 50 percent of the 16 percent rate). Companies and individuals with business income in the region can credit one third of the income tax due for the year or the provisional payment, in proportion to their income from the region. Access depends on filing a notice with SAT, for the income tax credit by 31 March of the year concerned (also the renewal deadline), and on meeting the decree conditions, including, for the income tax credit, obtaining at least 90 percent of total income in the region, excluding income from intangibles and digital commerce. A decree published on 31 December 2025 extended both regimes to 31 December 2026.
Cost to do it: No fee; requires notice to SAT and inclusion in the beneficiary register, plus compliance with the decree conditions each year.
Example: A store in Tijuana registered under the decree sells goods for MXN 1,000,000 and charges MXN 80,000 of VAT instead of MXN 160,000. If its income tax for the year is MXN 300,000 and all its income comes from the region, it can credit MXN 100,000 and pay MXN 200,000. / Sales of about USD 54,046 with VAT of about USD 4,324; income tax credit of about USD 5,405 at 18.5026.Decreto de estímulos fiscales región fronteriza norte, DOF 31 December 2018, and Decreto de estímulos fiscales región fronteriza sur, DOF 30 December 2020, as extended by the decree published in the DOF evening edition of 31 December 2025, Northern decree arts. Primero and Décimo Primero; 2025 decree arts. Primero and Segundo (transitional Primero of each decree), 2025-12-31 official text · verified 2026-10-26 · changed: The decree published on 31 December 2025 extended the northern and southern border income tax and VAT incentives, previously due to end on 31 December 2025, to 31 December 2026; unlike prior multi year extensions, it covers one year only.

Tax	Rate	When paid	Rule
Corporate income tax	30 percent of taxable result	Monthly advance by the 17th; annual return within three months of year end	LISR arts. 9 and 14
Tax losses	Carry forward 10 years, no carryback	Applied in the annual return	LISR art. 57
Interest deduction caps	3 to 1 debt to equity on foreign related party debt; net interest over 30 percent of adjusted tax profit (if interest exceeds MXN 20 million)	Annual	LISR art. 28, sections XXVII and XXXII
Dividends to foreign shareholders	10 percent withholding	With the provisional payment for the month of payment	LISR art. 164
Dividends not from CUFIN	30 percent on dividend times 1.4286, paid by the company	With the distribution	LISR art. 10
Interest to foreign residents	4.9, 10, 15 or 21 percent by type; top individual rate otherwise	By withholding	LISR art. 166
Royalties and technical assistance to foreign residents	25 percent in general (5 percent for railway cars, certain containers and trailers and licensed vessels; 1 percent for licensed commercial aircraft; top individual rate for patents, trademarks and advertising)	By withholding	LISR art. 167
VAT	16 percent (0 percent for listed items)	Monthly by the 17th	LIVA arts. 1o., 2o.-A and 5o.-D
VAT on foreign digital services	16 percent, collected by the foreign provider	Monthly by the 17th	LIVA art. 18-D
Border region incentives	8 percent VAT; one third income tax credit	Through 31 December 2026, with SAT registration	Border decrees, extended DOF 31 December 2025

Main Mexican business taxes, verified 26 October 2026 against the official texts cited on this page. Withholding rates are domestic rates before treaty relief.

Worked example

A foreign parent owns a Mexican S.A. de C.V. that earns a taxable result of MXN 10,000,000 (about USD 540,465) in 2026. It pays 30 percent, MXN 3,000,000 (about USD 162,139), through monthly provisional payments by the 17th of each following month, with the balance in the annual return by 31 March 2027.
During the year it paid MXN 1,000,000 (about USD 54,046) of technical assistance fees to the parent and withheld 25 percent, MXN 250,000, unless a treaty with the parent's country allowed a lower rate and the parent provided proof of residence.
Its loans from the parent stay within three times its equity, so interest is not disallowed under the thin capitalization rule, and its interest expense is below MXN 20,000,000, so the 30 percent cap does not apply.
The after tax profit of MXN 7,000,000 (about USD 378,325) is credited to CUFIN and paid out as a dividend. The company withholds 10 percent, MXN 700,000 (about USD 37,833), and wires MXN 6,300,000 (about USD 340,493), before any treaty reduction; because the dividend comes from CUFIN there is no extra company level tax under art. 10.
Throughout the year the company charged 16 percent VAT on its sales and paid the net VAT each month by the 17th.

Step by step

1. Register the company and its legal representative in the Federal Taxpayers Registry (RFC) and obtain the electronic signature (e.firma) needed to file returns and issue electronic invoices (CFDI).
2. Set the tax calendar: monthly income tax provisional payments, VAT and withholding returns by the 17th of the following month; annual income tax return by 31 March for calendar year companies; related party information return by 15 May.
3. Before the first intercompany charge, document related party pricing under LISR arts. 76 and 179 and check the thin capitalization and 30 percent interest caps when planning how to fund the subsidiary (debt or equity).
4. Before paying dividends, interest, royalties or fees abroad, identify the withholding rate in LISR arts. 164, 166 or 167, check whether a tax treaty lowers it and collect the recipient's proof of tax residence before payment.
5. If the business operates from premises in the northern or southern border region, evaluate the 8 percent VAT and income tax credit decrees and file the SAT notice by the deadline; the incentives currently end on 31 December 2026.
6. Track the 2027 income tax reform before closing 2026 plans, and recheck this page before large transactions; the verified date is shown at the top.

Common traps

Forgetting to use a loss. If a company could have applied a prior year loss and did not, it loses that amount for good (LISR art. 57), and losses cannot be moved to another company even by merger.
Funding a subsidiary mainly with parent debt. Interest on foreign related party debt above three times equity is not deductible (LISR art. 28, section XXVII), and groups with more than MXN 20,000,000 of interest also face the 30 percent of adjusted tax profit cap (section XXXII).
Assuming 10 percent withholding on a related party loan. The 4.9 and 10 percent interest rates do not apply where the beneficial owners receiving more than 5 percent of the interest are more than 10 percent shareholders of the debtor (LISR art. 166), so most intercompany interest falls under the residual top rate unless a treaty applies.
Paying dividends outside CUFIN. Dividends not paid from the net tax profit account trigger 30 percent company level tax on the grossed up amount (LISR art. 10), on top of the 10 percent shareholder withholding.
Treating trademark royalties like technical assistance. Patents, trademarks, trade names and advertising are taxed at the top marginal individual rate, not the general 25 percent (LISR art. 167).
Charging 8 percent VAT without registering. The border rate applies only to registered taxpayers who meet the decree conditions, and the decrees now expire each year; the current one ends 31 December 2026.
Ignoring Mexican VAT on digital sales from abroad. A foreign provider of digital services to Mexican recipients must register within 30 days of the first sale and charge 16 percent VAT (LIVA art. 18-D).
Planning 2027 on current law. A bill amending the income tax law for 2027 passed the Chamber of Deputies in October 2026 and was pending in the Senate when this page was verified; check whether it has been published in the DOF before relying on deduction or loss rules for 2027.

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

← Moving money in and out of Mexico: the FIX rate, dollar accounts, dividends abroad and cash at the borderEmploying people in Mexico: minimum wage, the move to a 40 hour week, mandatory benefits, dismissal costs, the outsourcing ban and social security →