The general taxation system for legal entities in Mexico is based on the principle of self-taxation: each company is required to independently maintain accounting records, calculate taxes, submit reports and ensure their digital verification through the SAT tax service platform. Control is carried out primarily online, using mandatory electronic reporting (CFDI, electronic declarations, XML documents), which allows tax authorities to compare data on income, expenses, employees and taxes paid.
The tax system is centralized, although individual taxes (particularly on property or wages) are set at the state level. However, basic corporate taxes - such as income tax (ISR), VAT (IVA), social contributions to IMSS and dividend tax - are unified at the federal level.
A significant part of Mexico's tax policy is aimed at digital transparency: tax breaks and deductions are given only if transactions are fully documented. Every financial transaction of a company - be it a sale, a lease, a salary payment or the payment of interest on a loan - must be supported by a corresponding electronic invoice (CFDI) registered in SAT. This makes shadow accounting impossible and requires businesses to constantly interact with the tax system in real time.
Taxation regimes for legal entities
Mexico has several tax regimes for legal entities, depending on the size of the business, type of activity and legal form.
Régimen General de Ley para Personas Morales(general regime for legal entities) - the main tax regime for companies registered as legal entities (S.A. de C.V., S. de R.L., etc.).
- All companies that do not fall under preferential or special regimes.
- Income tax rate (ISR): 30%.
- Accounting: Full accounting according to Mexican standards (NIF) is required.
- Liabilities:
- Monthly ISR advance payments.
- Monthly IVA (Income Value Added Tax) reports.
- Annual declaration (Declaración Anual).
- CFDI (electronic invoices) are mandatory for all transactions.
Régimen Simplificado de Confianza(RESICO) – simplified tax regime.
- Legal entities with annual income up to MXN 35 million. All participants must be individuals (founders and beneficiaries).
- Tax rate: 30%, as in the general regime.
- The difference: a simplified tax calculation base (only income received - confirmed by CFDI), without traditional accounting of expenses.
Régimen de Actividades Agrícolas, Ganaderas, Silvícolas y Pesqueras— special tax regime for agricultural and natural resource companies.
- Legal entities working in agriculture, logging, livestock farming, and fishing.
- Rates and Benefits: May be exempt from Income Tax (ISR) on incomes up to MXN 423,000 per annum.
- Special subsidies and reporting apply.
Main taxes for legal entities
In Mexico, companies are required to pay several key taxes:
- ISR(income tax) reaches 30% of taxable profit. Advance payments are made monthly.
- IVA(value added tax, VAT) has a rate of 16% and applies to most goods and services.
- PTU(employee profit sharing) is 10% of taxable profit. This is a mandatory annual payment to company employees.
- IMSS and otherssocial contributionsvary from 15% to 35% of the wage fund. The specific rate depends on the type of employment relationship, wages and benefits provided to the employee.
- Tax on dividends paid to shareholders reaches 10% and is withheld at source.
Although the main tax burden in Mexico is determined at the federal level, companies may also face local obligations. At the state level, there are taxes such as:
- Impuesto Sobre Nómina (ISN) is a payroll tax, usually 2% to 3%, levied by employers on the total amount paid to employees. Submission and payment are made monthly, separately from federal social contributions.
- Impuesto Predial is a property tax paid annually to the municipality where the property is located. The size depends on the cadastral value, rates vary, but, as a rule, are not burdensome.
In addition, some states have local fees and licenses, for example, for posting signs, selling alcohol, using natural resources, etc.
For legal entities in Mexicoincome tax ISRis calculated not on a progressive scale, but at a fixed rate of 30% of taxable profit. At the same time, deductions (deducciones autorizadas) are an integral part of calculating the tax base for ISR. The tax rate is fixed, but not all income is taxed, but taxable profit, in other words, income minus allowed deductions.
It is allowed to deduct from income:
- Salary and social contributions: all labor costs (if confirmed by CFDI, payroll, IMSS and SAT), including taxes IMSS, INFONAVIT, AFORE, PTU.
- Procurement and services: goods, raw materials, supplies, subcontracting, services (legal, consulting, rental, transport, etc.), if they are related to the main activity.
- Depreciation: deductions for depreciation of fixed assets (buildings, equipment, cars, etc.).
- Loan payments (interest): if the loan is formalized and interest is paid by bank.
- Losses and damages: including losses from previous years (over 10 years), if they are officially registered.
- Other expenses: travel expenses, advertising, rent, utilities, if they are related to the main activity, paid through the bank, confirmed by CFDI.
The following cannot be deducted from income:
- Expenses not supported by CFDI (electronic invoice).
- Expenses not paid by bank transfer (exceptions - up to 2,000 MXN).
- Personal expenses of shareholders/directors.
- Fines and penalties.
- Expenses not related to core activities.
To confirm deductions, the SAT is able to request:
- CFDI + payment confirmation (i.e. fact of payment).
- Contracts or agreements.
- Availability of appropriate accounts in accounting.
Without proper registration, the deduction simply will not be counted, and the company will pay tax on the full amount of income.
In addition, VAT (IVA) can be administered. Companies are required to keep separate records of incoming and outgoing IVA. The right to deduct incoming IVA arises only if there is a correct CFDI and non-cash payment. All calculations are verified by SAT automatically.
Tax incentives and subsidies. For certain industries and regions (especially in the south of the country, in the Frontera Zone and in special economic zones), tax incentives are provided: reduced IVA rates, accelerated depreciation, tax refunds and employment subsidies. Companies involved in exporting can register for IMMEX programs and will receive special tax treatment.
Company reporting
Legal entities in Mexico are required to file tax returns regularly, both monthly and annually. The bulk of the reports concern income tax (ISR), value added tax (IVA), payroll and contract deductions, as well as information on transactions with third parties. Submission is carried out exclusively electronically through the SAT portal, with the mandatory use of electronic signature and digital invoices (CFDI).
Monthly reporting contains an advance payment for ISR and a declaration for IVA, which must be submitted no later than the 17th day of the month following the reporting month. At the same time, the company must report withholding taxes on salaries and contract payments, and in addition, file a DIOT information return containing information about transactions with suppliers and contractors. Monthly reporting on social contributions to IMSS and other funds (say, INFONAVIT) will also be required, with similar submission deadlines.
The annual ISR tax return is submitted by March 31 of the year following the reporting year. It includes financial results of activities, tax calculations taking into account deductions and transfers of losses, and in addition information about profits to be distributed among employees (PTU). The latter is paid within 60 days after filing the declaration, that is, until the end of May.
If you have foreign operations or belong to a corporate group, transfer pricing reporting is additionally required. Violations in this area are particularly severely punished, including additional taxes and fines of up to 75% of the understatement amount.
All reporting forms must be accompanied by digital XML documents and validated via the electronic SAT system. If the filing deadlines are missed, the company risks being fined, losing the right to tax deductions, being subject to an audit, or even being temporarily blocked from the tax system (RFC). It is important to understand that the Mexican tax system is built on the principle of transparency, and the taxpayer bears full responsibility for the timeliness and accuracy of the information offered.
All your income and expenses must be verified via SAT supported by CFDI (electronic system of accounts). SAT regularly performs automated cross-analysis of all CFDIs. Companies are required to store all reports and digital documents for a minimum of 5 years.
SAT may initiate an audit (auditoría) if there are inconsistencies between the CFDI, supplier/client reports and declarations. The most common reasons are unreasonable deductions, late filing of reports or a sharp increase in losses. For late filing of reports - even by 1 day - fines are automatically assessed. For fictitious deductions or CFDI issued without a real transaction, there are large sanctions, including RFC blocking and criminal liability.
Company closure and tax liquidation
Closing a legal entity in Mexico is a lengthy and formalized process. You will need:
- file a notice of termination with SAT;
- submit the latest reports;
- confirm the absence of tax debt;
- purchase official permission from SAT to deregister a company (RFC).
Without full settlement with the tax authorities, liquidation is impossible.