How income tax works in Mexico
Mexico generally taxes individuals and legal entities resident in Mexico on worldwide income. Nonresidents are generally subject to Mexican income tax on Mexican-source income, with different rules where they have a permanent establishment in Mexico. The governing framework is Article 1 of the LISR; treaty relief may change the result.
Tax residence for individuals is addressed by Article 9 of the Federal Tax Code (Código Fiscal de la Federación), including the home and centre-of-vital-interests tests. See the Federal Tax Code.
Individual income tax rates
Resident individuals are taxed on a progressive scale, with marginal rates from 1.92% to 35% under Article 152 of the LISR for annual income tax. A marginal rate applies only to income within the corresponding band; tax is calculated using the applicable lower limit and fixed quota. Monthly withholding on salaries follows the relevant payroll schedules, including Article 96.
Exact peso thresholds vary by year. For current annual and payroll thresholds, consult SAT's current ISR tables and the applicable Diario Oficial de la Federación publication rather than applying historical thresholds to 2026 income.
| Individual tax feature | General treatment |
|---|---|
| Resident individual ISR | Progressive marginal rates: 1.92% to 35% |
| Employment income | Employer generally withholds ISR under Article 96 |
| Annual individual return | Rules under Articles 150 and 152; filing requirements depend on circumstances |
| Personal deductions | Potentially available under Article 151, subject to statutory limits and documentation |
Individual deductions and tax credits
Under Article 151, qualifying personal deductions can include specified medical and dental expenses, hospital expenses, certain mortgage interest, donations, retirement contributions and other statutory items. Each category has conditions and limits. Employment-related deductions and the employment subsidy, where applicable, are governed by separate rules.
Income tax for nonresidents
Title V of the LISR governs many payments to residents abroad from Mexican sources. Rates depend on income type, payer, treaty protection and whether the recipient has a Mexican permanent establishment. A single 30% rate does not apply to all nonresident income.
For certain Mexican employment income earned by nonresidents, Article 154 provides a threshold-based regime (historically 0%, 15% and 30% bands, subject to the applicable statutory amounts and conditions). Other income, including dividends, interest, royalties and business income, follows distinct provisions. Review the relevant treaty and beneficial-owner requirements before withholding.
Capital gains and property disposals
Mexico does not apply one universal capital gains tax rate to every asset. For residents, gains from disposals are generally incorporated into the applicable income-tax regime, with special calculations for real estate and securities. Individual property-sale rules are addressed in Articles 119 to 128 of the LISR, including allowable costs and adjustments.
For nonresidents selling Mexican real estate, Article 160 generally provides a 25% tax on gross proceeds, while a 35% tax on qualifying net gain may be available where statutory conditions and representative requirements are met. These are alternative legal methods, not a universal election for all disposals. Securities may be subject to other rules, including Article 161.
Some disposals of a principal residence can qualify for an exemption, subject to conditions in Article 93. Notaries and other intermediaries can have withholding and reporting responsibilities.
Corporate income tax in Mexico
The general federal corporate income tax rate is 30% of taxable profit under Article 9 of the LISR. Taxable income generally starts with taxable receipts, less authorized deductions and, where permitted, prior-year tax losses.
| Corporate tax item | General rule |
|---|---|
| Standard corporate ISR | 30% |
| Authorized deductions | Article 25, subject to Article 27 requirements and other limits |
| Tax losses | Article 57 generally provides carryforward rules and limits |
| Monthly provisional payments | Article 14 generally governs the calculation |
Typical deduction categories can include returns, discounts, cost of goods sold, ordinary expenses, qualifying depreciation and amortization, bad debts, certain interest, inflation adjustments and tax losses, provided statutory substantiation and limitation rules are satisfied. International groups should also consider transfer pricing and permanent establishment rules.
Historical reference: Mexico individual ISR rates for 2017
The original article covered 2017-2018. The following 2017 annual marginal brackets are retained for historical research and must not be used as current-year brackets. A mistaken upper band in the original table has been corrected to MXN 3,000,000.
| Annual taxable income (MXN) | Marginal rate |
|---|---|
| 0.01 - 5,952.84 | 1.92% |
| 5,952.85 - 50,524.92 | 6.40% |
| 50,524.93 - 88,793.04 | 10.88% |
| 88,793.05 - 103,218.00 | 16.00% |
| 103,218.01 - 123,580.20 | 17.92% |
| 123,580.21 - 249,243.48 | 21.36% |
| 249,243.49 - 392,841.96 | 23.52% |
| 392,841.97 - 750,000.00 | 30.00% |
| 750,000.01 - 1,000,000.00 | 32.00% |
| 1,000,000.01 - 3,000,000.00 | 34.00% |
| Over 3,000,000.00 | 35.00% |
Official legislation and tax administration
- Income Tax Law (Ley del Impuesto sobre la Renta) - substantive ISR provisions
- Federal Tax Code - residence, procedures and tax administration
- Mexican Tax Administration Service (SAT) - tax returns, forms, rates and guidance
- Official Gazette (DOF) - amendments, resolutions and official tax tables
Editorial note: The historical 2017 schedule is separate from the general legal overview. Tax-year thresholds, exemptions and treaty rules should always be checked for the relevant year and transaction.