Tax Guide 2025 – What You Need to Know If You Do Business in Mexico

Understanding the Mexican tax system can seem complex, especially if you have just started operating in the country or are unfamiliar with its rules. This guide will help you gain a clear and practical view of what you need to know in order to comply with your obligations and avoid unnecessary risks.

1. How Does the Mexican Tax System Work?

In Mexico, you are responsible for calculating and filing your taxes monthly and annually. The SAT (Tax Administration Service — Mexico’s equivalent of the IRS) ensures that everything is in order. If anything appears to be incorrect, you may receive a notification, be asked to respond to inquiries, or even be subject to a formal audit.

2. Main Taxes to Consider

Income Tax (ISR)

• If you operate a company, you pay 30% on net profits.

• If you're an individual (freelancer, professional, or landlord), the tax rate can be up to 35%, depending on your income.
  There is also a preferential regime called “RESICO”, with a maximum rate of 2.5%, for those earning less than $3.5 million pesos annually.

• Foreigners earning income in Mexico are generally subject to a withholding rate ranging from 10% to 35%

Value Added Tax (VAT / IVA)

• General rate: 16%

• 0% rate applies to certain goods and services, such as basic food items, medicines, and exports.

• Exemptions include residential rent and medical services.

IEPS (Special Tax on Production and Services)

• Applies to goods such as alcohol, tobacco, gasoline, and sugary drinks.

• You don’t pay it directly, but if you sell these products, you must report and declare the tax.

3. Your Tax Obligations as a Business or Individual

If you have a company:

You must:

• Issue electronic invoices (CFDI).

• File monthly and annual tax returns.

• Keep digital accounting records.

• Activate and monitor your tax inbox (Buzón Tributario) — this is mandatory.

If you are self-employed or an individual taxpayer:

• You may also need to file monthly and annual returns, depending on your tax regime.

• It’s highly recommended to work with a trusted accountant or advisor from the beginning.

4. What If I’m a Foreigner? Do I Have to Pay Taxes in Mexico?

• If you are a non-resident providing services or selling products in Mexico, you may have tax obligations here, even if your business is based abroad — especially if you maintain a physical presence, local representative, or warehouse in Mexico.

• The good news: Mexico has signed tax treaties with over 60 countries to prevent double taxation.
  Just keep in mind: you must provide an annual tax residency certificate from your home country to benefit from treaty provisions.

5. Tax tools

Tax email inbox

This works as your e-mail connection with the SAT and is compulsory. It is used to issue notifications concerning official reviews, reminders and requests.

Electronic invoicing (CFDI)

There are no printed invoices here. Everything is digital based on a specific format validated by the SAT. If you don’t invoice properly, you could run into difficulties when deducting expenses or justifying income.

6. Recommendations

✅ Keep everything in order rather than waiting for the tax authorities to initiate a review.
✅ Respond promptly to any communication from the SAT.
✅ Avoid aggressive or unclear tax strategies.
✅ Work with an accountant who understands your business model.

7. Final Thoughts

If you’re already doing business in Mexico — or considering it — this guide can help you understand how the system works. However, it does not replace personalized advice. It's always best to work with a specialist who can guide you and help ensure compliance.

That way, you avoid mistakes, penalties… and as they say: you’ll sleep better at night.

📩 Would you like to receive this guide in PDF format or discuss your specific case? Write to me at buzon@oscarheredia.mx — I’ll be happy to assist you.