Taxes in Mexico in 2026 for residents and expats

What taxes do you pay in Mexico in 2026

Almost all of Mexico's tax money goes to the federal government: income tax, VAT and excise duties carry the budget. States levy a payroll tax, municipalities tax real estate. There is no inheritance tax, no tax on gifts within the family and no wealth tax at all.

The authority that matters is the Mexican tax service. Every taxpayer gets a federal taxpayer number, and without one you cannot issue an invoice or be paid a salary on the books.

In one sentence: employees mostly pay income tax, consumers pay VAT, employers pay social contributions and payroll tax. For a freelancer, nearly everything comes down to the simplified regime plus VAT.

Tourist tax: what visitors pay

A foreign tourist pays no income tax, but does pay the DNR (Derecho de No Residente, the non-resident entry fee) on arrival. In 2026 it is 983 pesos, about 55 dollars, and is already built into the air fare. In 2025 it was 861 pesos.

States add their own hotel lodging taxes, and Quintana Roo, home to Cancún and Tulum, also charges its own Visitax. The government has proposed raising the DNR to 1,334.80 pesos for 2027, but that is still only a budget proposal.

Compare taxes in 146 countries: relocation taxes 2026

When do you become a tax resident of Mexico

Mexico is one of the few large economies where your home, not your day count, makes you a tax resident. Domestic law has no 183-day rule: Article 9 of the Federal Tax Code asks where you have set up house.

• A home only in Mexico. If you have a casa habitación (a permanent place where you actually live, not a hotel for a trip), you are resident. Days are not counted at all.
• Homes in two countries. Then your centre of vital interests decides. It is in Mexico if more than 50% of your annual income comes from Mexican sources or your main place of work is here.
• Mexican citizens are presumed resident unless they prove otherwise.

Hence an uncomfortable truth: a one-year lease on a flat in Mexico City or Playa del Carmen can make you resident even if you spend less than half the year in the country. The 183 days only appear in Mexico's double tax treaties. We explain how the rule works elsewhere in our piece on tax residency and the 183-day rule.

A residence card and tax status are different things

Residente temporal (temporary residence) or residente permanente (permanent residence) gives you the right to live in the country, but tax residency does not depend on it. You can hold a residence card and stay non-resident for tax, or become tax resident with no card at all. How to get the status is covered on our pages about residence permits in Mexico and moving to Mexico as a remote worker.

How to stop being resident

The aviso de cambio de residencia fiscal (notice of change of tax residence) must be filed no later than 15 days before you leave. No notice, and the tax service still treats you as resident.

If you move to a country on the REFIPRE list (regímenes fiscales preferentes, low-tax and offshore jurisdictions) or cannot prove your new residence, Mexico keeps treating you as resident in the year of the notice and for five more years. The exception is countries with a broad tax information exchange agreement with Mexico.

Mexico tax residency: how to become a resident without a 183-day rule

Mexico does not count days. A home makes you resident: a permanent place where you live, not a hotel for a trip. If you also have a home in another country, the centre of vital interests decides: more than half of annual income from Mexico or a main job here.

Mexican citizens are presumed resident unless they prove otherwise. A resident pays progressive income tax on worldwide income, a non-resident only on Mexican income. The status is confirmed by the Tax Administration Service.

Mistakes cost more: a house rented for a year in Playa del Carmen makes you resident from day one. Murblz support removes these risks: we assess the home and income, prepare the evidence and obtain the certificate. We guarantee professional work and a transparent process, and in most cases a result on the first filing.

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What is the income tax rate in Mexico and what do people actually pay

The top income tax rate is 35%, but it only applies above 5.1 million pesos a year, about 290,000 dollars at the 2026 exchange rate of roughly 17.7 pesos per dollar. A typical professional therefore pays far less than the headline figure suggests.

Residents pay on worldwide income, non-residents only on Mexican-source income. The 2026 table is published in Annex 8 of the Resolución Miscelánea Fiscal (the tax service's annual compendium of tax rules) and was indexed by about 13% against the table in force since 2023.

How to use it: find your row, subtract the lower limit, multiply the rest by the rate and add the fixed amount. Employers do the same every month with the monthly table, whose top bracket starts at 425,642 pesos a month.

This is an example calculation using the 2026 monthly table, before social contributions and exempt benefits. The point it makes: on mid-level salaries income tax takes 12-18%, not 30-35%.

No tax-free allowance, but a credit

Income tax starts from the first peso. Instead of a personal allowance there is the subsidio para el empleo (employment subsidy), a credit for low earners. In 2026 it equals 15.02% of the monthly official reference unit, or 536.22 pesos a month, and applies while the salary does not exceed 11,492.66 pesos a month.

The unit of measure and update is Mexico's reference unit for taxes and fines. From 1 February 2026, 1 reference unit = 117.31 pesos a day, 3,566.22 pesos a month and 42,794.64 pesos a year.

What is exempt

• the aguinaldo, the mandatory Christmas bonus, up to 30 daily UMAs, or 3,519.30 pesos;
• the prima vacacional, the holiday bonus, up to 15 UMAs, or 1,759.65 pesos;
• Employee profit sharing, the employee's share of company profits, up to 15 UMAs, or 1,759.65 pesos;
• pensions up to 15 UMAs a day, about 53,500 pesos a month.

Personal deductions

In the annual return a resident can deduct medical bills, mortgage interest, voluntary pension contributions, health insurance and donations. The cap is the lower of 15% of annual income or 5 annual UMAs (213,973.20 pesos).

States add no surcharge to income tax: income tax is purely federal. States do, however, tax payroll, and that falls on the employer.

How much tax do freelancers pay in Mexico under the simplified regime

A consultant with 1.5 million pesos of annual revenue, about 85,000 dollars, pays 30,000 pesos of income tax in Mexico - 2% of turnover. There is no scheme involved: this is the simplified trust regime for small business introduced in 2022.

Under the simplified regime for individuals, tax is charged directly on the money received, with no deduction for expenses. The ceiling is 3.5 million pesos of revenue a year, about 198,000 dollars.

The rates are unchanged for 2026 and set out in Article 113-E of the LISR (Ley del Impuesto Sobre la Renta, the Income Tax Law).

The conditions people trip over

• You need an electronic signature from the tax service, which is issued in person at a tax office.
• The Buzón Tributario, the electronic tax mailbox through which the tax service sends notices, must be active. Unread notices count as delivered.
• Every payment received needs an electronic invoice registered with the tax service the moment it is issued.
• You cannot be a shareholder of a company or a related party of the business paying you.
• Miss three monthly payments in a year, skip the annual return or go over 3.5 million pesos, and you are moved to the general regime.

When a Mexican company pays you, it withholds 1.25% income tax from the invoice and pays it over on your behalf. The amount withheld is credited against your tax.

VAT and social security still apply

The simplified regime only lowers income tax. A freelancer charges 16% VAT under the normal rules: for corporate clients it is neutral, for private clients the service becomes 16% more expensive. Contributions to the Mexican Social Security Institute are not mandatory for the self-employed, but without a voluntary policy you have neither public healthcare nor pension savings.

The simplified regime is only open to Mexican tax residents. A foreigner with a residence card and a taxpayer number uses it on the same terms as Mexicans; a tourist cannot.

What the 2027 budget proposes

The Paquete Económico 2027 (the package of budget laws) sent to Congress on 8 September 2026 proposes raising the simplified regime ceiling for individuals from 3.5 to 5 million pesos, allowing quarterly income tax payments and a flat 7% VAT on receipts. For now it is only a proposal.

What is the VAT rate in Mexico: 16%, 8% and 0%

The standard rate of VAT, Mexico's VAT, is 16%, and there is no registration threshold. The obligation to charge it starts with the first taxable sale: even a freelancer billing 200,000 pesos a year adds VAT to every invoice. For comparison, the rate is 19% in Colombia, 13% in Costa Rica and 7% in Panama.

The difference between 0% and exempt is money. At the zero rate, VAT paid to suppliers is refunded. When a supply is exempt it is not, and it sticks in your costs.

How and when VAT is paid

Returns and payments are monthly, by the 17th of the following month. Companies also file the DIOT (Declaración Informativa de Operaciones con Terceros, a report on transactions with suppliers). Refunds of excess VAT are possible, but the tax service reviews them slowly and closely, so exporters should plan for a cash-flow gap.

Withholding at source also applies. A company paying an individual under the general regime for services or rent withholds two-thirds of the VAT (10.6667% of the invoice) plus 10% income tax and pays both to the treasury itself.

Digital services and marketplaces

Since 2020 foreign providers of digital services register in Mexico and charge 16% on sales to local customers. The 2026 reform tightened the rules. From 1 April 2026 platforms must give the tax service real-time online access to transaction data. Income tax withheld from individuals selling goods and services through platforms rose from 1% to 2.5%. Non-compliance can lead to a temporary block of the service in Mexico.

Can tourists get VAT back

Partly, yes. The devolución de VAT a turistas extranjeros (VAT refund for foreign tourists) programme covers purchases of at least 1,200 pesos in participating stores, paid by card. You must leave by air or sea, and refunds are handled at kiosks in airports and seaports. Cash purchases count only up to a limited amount, so paying by card is safer.

What taxes does a non-resident pay in Mexico

A non-resident pays only on Mexican-source income, and the payer almost always withholds the tax. Withholding applies to the gross amount, with no deduction for costs, and is final: no return is needed. The rates are higher than for residents precisely because expenses are ignored.

The option of 35% on the net gain instead of 25% on the price is not open to everyone: you need a tax representative in Mexico, and for shares also residence in a country that has a tax treaty with Mexico. If a flat is sold at a small markup, 25% of the price is almost always worse, because it ignores what you paid for it.

A double tax treaty lowers many of these rates. To claim the lower rate, the recipient gives the Mexican payer a certificate of tax residence from their own country for the relevant year in advance.

If a foreigner's activity in Mexico creates a permanent establishment (establecimiento permanente - an office, warehouse, construction site or an agent concluding contracts in your name), the rules change completely: the establishment computes profit like any Mexican company and pays 30%.

What is the corporate tax rate in Mexico and what else do businesses pay

Mexico's corporate income tax is a flat 30%, unchanged since 2010, with no state-level profit tax on top. But for an owner with staff, 30% is only the start of the bill: the mandatory employee profit share and the dividend tax push the total above 40%.

Losses carry forward for 10 years with inflation indexing; there is no carry-back. Interest deductions are capped: net interest expense above 20 million pesos a year is deductible only up to 30% of adjusted taxable profit, and debt owed to related foreign parties should not exceed three times equity.

Employee profit sharing: 10% of profit goes to employees

Employee profit sharing is not formally a tax, but for a company with staff it is just as compulsory. Employees share 10% of taxable profit. Since 2021 each worker's payout is capped at three months' salary or their average employee profit sharing over the last three years, whichever is better for the worker.

Dividends

When paying dividends to individuals or foreigners, the company withholds an extra 10% on profits earned from 2014 onwards. This tax is final. Residents also report the dividend in their annual return, with a credit for the tax the company has already paid.

Small companies: the simplified regime for legal entities

Companies with revenue up to 35 million pesos can use the simplified regime for legal entities. The rate stays at 30%, but income and expenses are recognised on a cash basis and investments are depreciated faster. It is not a tax cut but healthier cash flow.

Incentives that actually work

• Border zones. In the north and south of the country, registered businesses get an income tax credit that brings the rate down to 20% and charge 8% VAT instead of 16%. The decree was extended on 31 December 2025, but only until 31 December 2026, so building a multi-year model on it is risky.
• Plan México. A decree of 21 January 2025 allows immediate write-off of new fixed assets: 41-91% of the cost for investments made in 2025-2026 and 35-89% for 2027-2030. It adds an extra deduction of 25% of the increase in spending on staff training and innovation. The incentive is granted on application: a committee approves projects, and the total pool is 30 billion pesos until 30 September 2030.
• IMMEX and maquiladora. A regime for export manufacturing with VAT deferral on imported inputs.

We handle company registration with the taxpayer number, the electronic signature and electronic invoicing setup - see company registration.

What does an employee cost: payroll taxes and social security contributions

In Mexico almost the entire payroll burden falls on the employer: the employee pays about 2.5-3% of salary into social security, the company several times more. On top of that, the employer's pension contribution rises every year until 2030, so staff costs grow faster than inflation.

Contributions are calculated on the SBC (salario base de cotización, the contribution base), which is the salary plus regular benefits. The cap is 25 UMAs a day, or 2,932.75 pesos a day, about 89,150 pesos a month. Nothing above the cap is subject to contributions.

The employer CEAV rate rises every year under the 2020 pension reform schedule; by 2030 the top rate reaches 11.875%. The employee share stays at 1.125%.

All in, the employer pays roughly 20-30% on top of salary. The exact figure depends on the salary level, the occupational risk class and the state, so for a hiring budget it is worth pricing each specific role.

Payroll tax by state

On top of contributions, every state charges ISN - from 2.4% to 4.25% of gross payroll. Only the employer pays, and it is filed monthly.

The self-employed do not have to register with the Mexican Social Security Institute: compulsory social security is tied to an employment contract. Voluntary enrolment is possible, and anyone moving with a family should think about it early.

How are property, shares, savings and inheritance taxed in Mexico

Mexico has no separate capital gains tax: gains on selling assets are added to your other income and taxed on the scale of up to 35%. There is one exception, and it favours people who trade on the local stock exchange.

• Shares on the Mexican exchange. 10% on the net annual result, as a final tax. Losses carry forward for 10 years, but only against the same kind of gains.
• Foreign shares and crypto. Gains go into the general base at up to 35%. Companies in low-tax countries fall under the REFIPRE regime: their income is taxed in the hands of the Mexican owner even before dividends are paid. More in our service on controlled foreign companies and in our overview of crypto and taxes when relocating.
• Bank deposits. Banks withhold an income tax advance of 0.90% a year - not on the interest, but on the average balance. In 2025 the rate was 0.50%. In the annual return only real interest, net of inflation, is taxed, and any excess is credited or refunded.

Real estate

• On purchase you pay ISAI: 2-3%, progressive in Mexico City. The base is the highest of the deal price, the cadastral value or an appraisal. Notary, appraisal and registration fees come on top.
• Every year you pay predial, the municipal property tax: a fraction of a percent of cadastral value, and many municipalities give a discount for paying early in the year.
• On sale the notary withholds income tax. A resident pays no tax on the sale of their own home if the price does not exceed 700,000 UDIs, about 6.2 million pesos in 2026. The UDI (Unidad de Inversión, investment unit) is an inflation-indexed unit published by the Bank of Mexico, worth about 8.8 pesos. The exemption can be used no more than once every three years.

Foreigners cannot own land directly within 100 kilometres of the borders or 50 kilometres of the coast: there they buy through a fideicomiso, a bank trust. See our page on buying property in Mexico.

Inheritance and gifts

There is no inheritance, gift or wealth tax. Inheritances are fully exempt from income tax, and so are gifts between spouses and between relatives in the direct line. Gifts from anyone else are taxed above three annual UMAs, about 128,000 pesos a year.

A trap for newcomers: loans, gifts and prizes above 600,000 pesos in a year must be disclosed in the annual return, or the tax service may tax them as income.

What changed in Mexican taxes in 2026

The 2026 reform left the headline rates of 35%, 30% and 16% alone, but it hit savers, smokers, soft-drink buyers and digital platforms. The package was published in the DOF (Diario Oficial de la Federación, the official gazette) on 7 November 2025 and took effect on 1 January 2026.

The law introduced an 8% excise tax on violent video games, but the president decided not to collect it: a decree of 31 December 2025 grants a stimulus equal to 100% of the tax. The border incentives of 8% VAT and 20% income tax were extended, but only for a year, to 31 December 2026.

Mexico's junk food tax

This is the popular name in Mexico for the 8% IEPS on high-calorie foods - snacks, sweets, chocolate, ice cream and other products with more than 275 kilocalories per 100 grams. It has applied since 2014 and did not change in 2026. Health groups are pushing to raise it to 20%, but that has not become law.

What the 2027 budget bill changes

The 2027 budget was submitted on 8 September 2026. For individuals it contains three important ideas: raising the simplified regime ceiling from 3.5 to 5 million pesos, an optional simplified 7% VAT for small businesses and an increase in the DNR entry fee from 983 to 1,334.80 pesos. All of this is still a proposal: Congress will set the final numbers.

Taxes in Mexico vs the United States, Panama, Costa Rica and Colombia

On rates, Mexico sits mid-table: lighter than Colombia, noticeably heavier than Panama and Costa Rica. The decisive difference is not the percentages but the principle: Mexico taxes residents on worldwide income, while Panama and Costa Rica tax only local income.

What this means in practice:

• A remote worker with foreign income pays income tax on the Mexican scale, like a local. In Panama or Costa Rica the same foreign income may not be taxed at all. Details in our guides to taxes in Panama and taxes in Costa Rica.
• A freelancer with Mexican clients wins here: the simplified regime at 1-2.5% of turnover is hard to match elsewhere.
• A company with a real business on the ground pays less in Mexico than in Colombia, where the rate is 35%, but more than in the United States with its 21% federal rate. Compare the neighbours on our pages on taxes in Colombia and taxes in the United States.

The full list of countries we cover is in taxes by country.

Are there tax breaks for expats, retirees and American citizens in Mexico

Mexico has no special tax regime for newcomers. There is no exemption for foreign income in the first years, as in Chile, no tax holiday, as in Uruguay, no reduced rate for retirees and no status for digital nomads. Once you are resident, you pay on worldwide income under the normal rules from day one.

Three things work instead: the simplified regime at 1-2.5% for business owners, the absence of residence while you have no permanent home in the country, and the pension exemption of up to 15 UMAs a day, about 53,500 pesos a month. Border incentives and Plan México are business incentives and give individuals without a business nothing.

American citizens in Mexico

Americans face double taxation on paper: Mexico taxes residents on worldwide income, and the United States taxes its citizens wherever they live. Two mechanisms help. The FEIE (Foreign Earned Income Exclusion) lets you exclude up to 132,900 dollars of earned income from the United States base in 2026. On top of that, Mexican income tax is creditable in the United States as a foreign tax, and the two countries have a tax treaty.

On mid-range incomes income tax rates are comparable to American rates, so the credit often wipes out the American tax entirely. But you file returns in both countries.

Other newcomers

The rules are the same as for everyone: tax on worldwide income once you have a home in Mexico, and the treaty with the country of the income decides how foreign tax is credited. If Mexico is also your route to a passport, see our guide to Mexican citizenship.

Pitfalls and who Mexico's tax system does not suit

Mexican rates are moderate; mistakes in the paperwork are what cost money. The tax service sees almost everything: every electronic invoice is registered when it is issued, platforms pass on data in real time, and the tax office learns about residents' foreign accounts through the CRS (Common Reporting Standard, the automatic exchange of financial account information between countries).

Seven traps people discover too late

• A one-year lease makes you resident. With no 183-day rule, a long-term rental can switch on tax on worldwide income before you have decided to move.
• Leaving without notice does not count. Without the aviso de cambio de residencia fiscal you remain resident, and if you move to an offshore jurisdiction, for five more years.
• No electronic invoice, no expense. Costs without an electronic invoice are not deductible.
• Large transfers from family. Loans and gifts above 600,000 pesos a year that are not disclosed in the return can be taxed by the tax service as income.
• Employee profit sharing in the business plan. Foreign investors often forget the 10% of profit owed to employees and model the burden at 30%.
• VAT refunds. Exporters can reclaim input VAT, but the tax service reviews refunds closely and the money is frozen in the meantime.
• Border incentives for one year only. The 8% VAT and 20% income tax rates run only to the end of 2026; after that it is up to the government.

Who Mexico does not suit

• People living on large passive income from abroad: dividends and interest are taxed on the scale of up to 35%, and there is no newcomer regime. Territorial Panama or Costa Rica win here.
• Anyone looking for a base for a holding or service company with no real activity: the burden on distributed profit exceeds 40% when there are employees.
• Anyone not ready for monthly filings and bookkeeping support: here that is not optional, it is a condition of doing business.

Who it suits

Freelancers with revenue up to 3.5 million pesos, professionals on a mid-level Mexican salary and companies that genuinely produce or sell in Mexico.

When are tax returns due in Mexico and what are the penalties

The key date for individuals is 30 April: the annual income tax return for the previous year is due by then. Companies file by 31 March, and monthly payments for both are due by the 17th.

A mandatory audit is rare in Mexico: the 2 billion peso threshold leaves out everyone except large groups. A voluntary dictamen is available with income from 157,785,270 pesos or assets from 124,650,380 pesos, sometimes chosen for a gentler audit process. We prepare filings and audits through our audit and reporting service.

Penalties in 2026

The fines in Article 82 of the Tax Code were indexed on 1 January 2026:

• failing to file a return - 2,050 to 25,360 pesos per obligation;
• failing to comply with a tax service request, or complying late - up to 50,710 pesos;
• failing to file mandatory electronic reports - 20,790 to 41,590 pesos.

If you correct the error yourself before the tax service sends a request, there is no fine (Article 73 of the Tax Code). But the tax is still paid with inflation indexing and recargos, a monthly late-payment surcharge.

An honest word on the burden: the income tax scale is not the heaviest in the region, but the administration is among the most demanding in Latin America. An electronic invoice for every transaction, monthly returns, electronic accounting and constant reconciliations mean that even a freelancer needs bookkeeping support, which Murblz specialists arrange together with local partners.

Mexico's double tax treaties and the foreign tax credit

Mexico has more than 60 double tax treaties, including with the United States, Canada, Spain, the United Kingdom, Germany, China, Japan, the United Arab Emirates and most of Latin America, as well as Ukraine, Latvia, Lithuania and Estonia. There is no treaty with Kazakhstan, Belarus, Armenia, Azerbaijan, Georgia, Uzbekistan or Kyrgyzstan, so payments there are taxed at domestic non-resident rates.

The treaty with Russia, signed in 2004, applies in 2026 and caps withholding at 10% on dividends, interest and royalties: Russia's 2023 suspension of treaties does not affect Mexico.

Check the list on the tax service portal before a transaction: it changes.

How to credit tax paid abroad

A Mexican resident can credit foreign tax against income tax on the same income. The credit cannot exceed the Mexican tax on that income, it is calculated separately for each country and type of income, and unused credit carries forward for 10 years. You will need proof that the foreign tax was paid.

Mexico takes part in the CRS, so the tax service automatically receives information on your accounts in other countries. Hiding foreign income will not work; crediting the tax correctly certainly can.

How much do you keep: Mexico tax calculation examples

Four typical situations. The figures are an example calculation at 2026 rates: risk class, state and pay structure all change the result.

An employee earning 30,000 pesos a month

That is about 1,700 dollars, the level of a skilled professional in a big city.

• Income tax: the salary falls in the 17,533.65-35,362.83 peso bracket. 1,856.84 + 21.36% of (30,000 - 17,533.65) = about 4,520 pesos.
• Employee social security contributions - about 800 pesos.
• Take-home pay - about 24,700 pesos, a burden of about 18% for the employee.

On top of the salary, the employer pays about 7,000 pesos in the Mexican Social Security Institute and INFONAVIT contributions and 900 pesos of payroll tax at a 3% rate. The full cost of the employee is about 37,900 pesos, so the gap between what the company spends and what the person takes home is roughly 35%.

A freelancer under the simplified regime with 1,500,000 pesos of annual revenue

• The simplified regime: 2% of receipts, income tax for the year - 30,000 pesos. Expenses are not deducted, and not needed.
• General regime with 300,000 pesos of expenses: base 1,200,000 pesos, income tax = 125,485.07 + 30% of (1,200,000 - 668,840.15), about 284,800 pesos.
• The simplified regime comes out almost 9.5 times cheaper.

The general regime only wins if expenses exceed roughly 84% of revenue. For consulting, software development and design that is almost impossible.

A remote employee of a foreign company earning 60,000 dollars a year

At about 17.7 pesos per dollar that is roughly 1,061,500 pesos. If you are a Mexican tax resident, annual income tax comes to 125,485.07 + 30% of (1,061,500 - 668,840.15), about 243,300 pesos, or 23% of income. There is no Mexican employer to withhold it, so you make the advance payments yourself every month by the 17th.

A company with 5,000,000 pesos of profit and employees

• Employee profit sharing of 10% for employees - 500,000 pesos. In steady state, last year's employee profit sharing is deducted from the tax base.
• Income tax at 30% on 4,500,000 pesos - 1,350,000 pesos.
• Profit available for distribution - 3,150,000 pesos, of which 10% dividend tax - 315,000 pesos.

The owner receives about 2,835,000 pesos: a total burden of about 43% of profit. Without employees and employee profit sharing it would be about 37%. That is higher than in Cyprus or Eastern Europe, which is why keeping a holding or pure service company in Mexico without real activity in the country does not pay. Compare European options in our overview of taxes in Europe in 2026.

What matters about taxes in Mexico

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