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Mexico tax losses: ten year carryforward, no carryback, inflation restatement and limits after mergers and changes of control

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

A Mexican company's tax loss can be offset against taxable profit of the following ten years, restated for inflation; there is no carryback, and a loss that could have been used in a year but was not is forfeited for that amount. Losses are personal: they cannot be transferred, not even by merger, and are split in a spin off only between companies continuing the same line of business. After a merger, or a change of control of a company whose income over three years was below its losses, losses can only be used against profits from the same line of business; buying or selling losses is also a target of the SAT's presumption rules.

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

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
Tax losses restated for inflation	Yes LISR art. 57, as of 2026-10-26 · in force
Losses transferable to another company by merger	No LISR art. 57, as of 2026-10-26 · in force
Voting share change that counts as change of control for loss limits (within three years)	More than 50 %LISR art. 58, section I, as of 2026-10-26 · in force

The rule

1. Ten year carryforward, use it or lose it. A tax loss is the excess of authorized deductions over taxable income (increased by PTU paid in the year). It may be deducted from taxable profit of the following ten years until used up. If the taxpayer does not apply a prior loss in a year when it could have, it loses the right to apply that amount in later years. There is no carryback to earlier years.
Cost to do it: No fee; the risk is forfeiting the loss if not applied when profit is available, or after ten years.
Example: A company loses MXN 15,000,000 in 2026 and has profits of MXN 5,000,000 in each of 2027 to 2029. It must apply MXN 5,000,000 a year (plus inflation restatement); the loss would expire after 2036 if unused. / Loss of about USD 810,697; tax saving of up to about USD 243,209 at 30 percent and 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. 57, first to fourth paragraphs, 2013-12-11 official text · verified 2026-10-26

2. Inflation restatement. The loss is first restated by the inflation factor from the first month of the second half of the year in which it arose to the last month of that year; the unused balance is then restated from the month last restated to the last month of the first half of the year in which it is applied. This preserves the real value of losses in an inflationary environment.
Cost to do it: None; restatement increases the deductible amount.
Example: A MXN 10,000,000 loss from 2026 applied in 2028 is increased by cumulative inflation between July to December 2026 and mid 2028; with inflation of, say, 6 percent over that period it would offset about MXN 10,600,000 of profit. / Loss of about USD 540,465 restated to about USD 572,892 under that inflation assumption, 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. 57, fifth and sixth paragraphs, 2013-12-11 official text · verified 2026-10-26

3. Losses cannot be transferred; spin offs. The right to deduct losses belongs only to the taxpayer that incurred them and cannot be transferred to another person, including through a merger. In a spin off, pending losses are divided between the splitting company and the new companies that carry on the same line of business, in proportion to inventories and receivables (for commercial companies) or fixed assets (for others), excluding real estate not used in the main activity.
Cost to do it: None; the cost is lost tax value when restructuring.
Example: Company A, with MXN 30,000,000 of losses, is merged into profitable Company B. B cannot use A's losses because the merging company that incurred them disappears. / Losses of about USD 1,621,394 with a tax value of about USD 486,418 lost in the merger 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. 57, seventh to ninth paragraphs, 2013-12-11 official text · verified 2026-10-26

4. Mergers and change of control. After a merger, the surviving company can use its own pending losses only against profits from the same lines of business in which they arose. When the shareholders who control a company with pending losses change and its income in the last three years was less than the restated losses, it can only use those losses against profits from the same line of business. A change of control exists when, in one or more acts within three years, holders of more than 50 percent of voting shares change, holders of rights to impose decisions in shareholders' meetings or appoint most directors change, holders of rights to direct management or strategy change, or, after a merger, the company and its corporate shareholder stop consolidating; acts subject to a condition count from signing. Inheritance, gifts and tax neutral reorganizations where the same shareholders keep control are excluded.
Cost to do it: None; limits the value of losses in acquisitions.
Example: A buyer acquires 100 percent of a start up with MXN 40,000,000 of losses and only MXN 10,000,000 of income over the past three years, then moves a profitable new business into it. The losses can be used only against profits of the start up's original line of business. / Losses of about USD 2,161,858; income of about USD 540,465 in three years 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. 58, 2013-12-11 official text · verified 2026-10-26

Situation	Rule	Article
Carryforward	Ten years, restated for inflation	LISR art. 57
Carryback	Not allowed	LISR art. 57
Loss not used when profit was available	Forfeited for that amount	LISR art. 57
Merger	Absorbed company's losses lost; survivor's losses only against same line of business	LISR arts. 57 and 58
Spin off	Split among companies carrying on the same line of business	LISR art. 57
Change of control with low income	Only against profits of the same line of business	LISR art. 58

Mexican tax loss rules at a glance, verified 26 October 2026

Worked example

A Mexican subsidiary loses MXN 8,000,000 (about USD 432,372) in its 2026 start up year and earns MXN 3,000,000 a year from 2027.
It applies the restated loss against 2027, 2028 and 2029 profits, paying little or no income tax in those years; it must not skip a year in which profit is available, or that amount is lost.
If the foreign parent sells the subsidiary in 2028 to a buyer who then changes its business, the art. 58 test applies because the three year income was below the pending losses, and the remaining loss can only offset profits from the original activity.

Step by step

1. Keep a schedule of each year's loss, its restatement factors and the year it expires.
2. Apply available losses every year there is taxable profit; do not hold them back.
3. Before a merger, model which company should survive, because the absorbed company's losses are lost.
4. Before a sale of shares, run the art. 58 change of control test and document the lines of business that generated the losses.
5. Note that the monthly advance payments may also be reduced by pending losses (LISR art. 14).

Common traps

Holding back losses for later. A loss that could have been applied and was not is forfeited for that amount (LISR art. 57).
Merging the loss company into the profit company. The losses disappear; the reverse structure or other planning may be needed (LISR art. 57).
Buying a loss shell. After a change of control with low income, losses are limited to the original line of business (LISR art. 58).
Conditional deals. Signing a share purchase subject to conditions starts the change of control clock at signing (LISR art. 58).

Sources

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