Mexico Tax System Overview in 2025

Mexico operates under a dual-tier tax system established by its constitution, allowing both federal and local (state and municipal) governments to levy taxes. The federal government controls the majority of tax revenue, collecting key national taxes such as corporate income tax, while local authorities manage smaller, region-specific levies. Although not a fully decentralized fiscal model, Mexico uses intergovernmental transfers to redistribute federal funds to state and municipal levels, supporting regional development and public services.

Main Taxes and Rates in Mexico

Mexico follows a residence-based taxation principle, applying to both individuals and legal entities. According to OECD data, Mexico’s corporate tax rate stands at 30%, ranking among the highest in the OECD. The tax structure is primarily built around two pillars: income tax and value-added tax (VAT). Additional taxes include capital gains, property, payroll, import duties, and excise taxes on specific goods and services. Local governments may impose real estate, business asset, and transaction taxes.

Corporate Income Tax

Companies operating in Mexico—whether domestic or foreign—are subject to corporate income tax on their Mexican-sourced income. Non-resident firms are taxed only on income generated within the country. Since the 2013 tax reform, the standard rate has remained at 30%. Prior sector-specific exemptions for agriculture, fishing, forestry, and livestock were eliminated. Additionally, dividends distributed to shareholders are subject to a 10% withholding tax known as the 'dividend tax.'

Personal Income Tax

Tax residency determines liability: Mexican residents pay tax on worldwide income, while non-residents are taxed only on Mexican-source earnings. Following the 2013 reform, personal income tax follows a progressive scale. Key brackets include:

• No tax for annual income up to 6,942.20 MXN.
• 6.40% on income above 6,942.21 MXN, plus a fixed fee of 133.28 MXN (up to 58,922.16 MXN).
• 10.88% above 92,217.17 MXN, with a base tax of 3,460.01 MXN.
• 16.00% above 103,550.45 MXN, base tax: 8,315.57 MXN.
• 17.92% above 120,372.84 MXN, base tax: 11,007.14 MXN.
• 21.36% above 144,119.24 MXN, base tax: 15,262.49 MXN.
• 23.52% above 290,667.76 MXN, base tax: 46,565.26 MXN.
• 30.00% above 458,132.30 MXN, base tax: 85,952.92 MXN.
• 32.00% above 874,650.01 MXN, base tax: 210,908.23 MXN.
• 34.00% above 1,166,200.01 MXN, base tax: 304,204.21 MXN.
• Top rate of 35.00% applies to income exceeding 3,498,600.01 MXN, with a fixed amount of 1,097,220.21 MXN.

These thresholds are periodically adjusted for inflation and reflect Mexico’s effort to balance equity and revenue generation.

Value-Added Tax (VAT)

VAT applies to most sales of goods, services, rentals, and imports. The standard rate is 16% nationwide. However, certain items like land sales and printed books are exempt. In border regions, a reduced VAT rate of 8% was introduced in 2018 to stimulate cross-border trade and economic activity.

Resource and Mining Royalties

Under Mexican law, mining operations require federal authorization. Foreign investors must establish a locally registered entity to apply. Companies pay semi-annual fees based on concession size and operational duration. These charges serve as both regulatory oversight and revenue tools for the federal government.

Business Asset Tax

This is a significant local tax imposed at the state level, calculated as 2% of a company’s net asset value. It acts as a complement to federal corporate income tax and helps ensure broader tax coverage, especially for firms with high asset bases but lower reported profits.

Real Estate and Transfer Taxes

Property tax is assessed based on appraised value and administered by state governments, which set their own rates. Real estate transfer tax applies when ownership changes hands and varies by jurisdiction. Both are critical revenue sources for municipalities.

Profit-Sharing Tax (PTU)

Mexican labor law mandates that employees receive a share of company profits, typically 10% of taxable income. This distribution is taxable as personal income but encourages workforce participation in corporate success.

Digital Services Tax

In response to the rapid growth of the digital economy, Mexico began taxing online platforms and digital service providers in 2019. A 16% VAT applies to digital products and services sold to Mexican consumers, aligning e-commerce with traditional retail taxation.

Carbon Tax

Introduced in 2013, Mexico’s carbon tax targets fossil fuel consumption, calculated based on CO₂ emissions. It reflects the country’s commitment to environmental sustainability and climate change mitigation, though it functions more as a pricing mechanism than a standalone environmental levy.

Other Key Provisions

Taxpayers from countries with bilateral tax treaties with Mexico benefit from preferential rates to avoid double taxation. Given the complexity of Mexican tax law and strict enforcement, businesses are strongly advised to engage qualified local accounting and legal professionals. Penalties for non-compliance can be severe.

A major policy shift occurred after December 1, 2018, when the new administration proposed reforms including lowering corporate tax to 20% nationally and 24% for eco-friendly enterprises. While some proposals remain under discussion, the 8% VAT in border zones has been implemented.

Special Economic Zones and Export Programs

The Ministry of Finance oversees special economic zones (SEZs), designed to boost investment and employment in underdeveloped regions. Incentives include VAT exemptions, reduced income taxes, and streamlined regulations. Investors must obtain management permits to operate within these zones.

Mexico’s northern border hosts numerous export-oriented manufacturing facilities—known as maquiladoras. These plants enjoy duty-free importation of raw materials and components, provided final products are exported. This regime supports integration with U.S. supply chains and remains a cornerstone of Mexico’s industrial strategy.

In November 2019, the current administration canceled several prior regional development initiatives, shifting focus toward targeted, sustainable projects with measurable social impact. This reflects a broader emphasis on inclusive growth over broad tax giveaways.

For international businesses exploring opportunities in Mexico, understanding these tax dynamics is essential. Strategic planning, compliance, and leveraging incentives through programs like SEZs or maquiladoras can significantly improve operational efficiency. For those managing global teams, SailGlobal offers expert offshore human resource solutions tailored to Latin American markets, ensuring seamless compliance and talent management across borders.