Taxes in Mexico for Expats 2026

Key Figures

Tax System Overview

Mexico's tax system is based on federal legislation and administered by SAT. Main taxes: ISR (income tax), IVA (VAT), IEPS (excise duties), and ISAI (property acquisition tax). Municipalities additionally collect predial (property tax).

For individuals, ISR is a progressive tax on total income. Mexican tax residents must declare worldwide income; non-residents pay only on Mexican-source income, generally at fixed withholding rates (retención).

Mexico has around 60 active double-taxation treaties (DTTs), including with the US, Canada, Spain, most EU countries, the UK, China, and Japan. A DTT allows taxes paid abroad to be credited against SAT obligations.

Tax Residency in Mexico

Under Article 9 of LISR, an individual is a Mexican tax resident if: (1) their "centre of vital interests" is in Mexico — meaning they derive more than 50% of their worldwide income from Mexican sources, or their principal place of business is in Mexico; or (2) they have spent more than 183 days in a calendar year in Mexico (days need not be consecutive).

Tax residency must not be confused with immigration residency (temporary or permanent permit): holding a Mexican residence card does not automatically make you a tax resident. You can live in Mexico for 182 days on a residency permit and not be a tax resident. Conversely, tourists spending more than 183 days technically become tax residents, even without a permit.

Ceasing tax residency: to stop being a Mexican tax resident, you must notify SAT of the change and prove you have acquired residency in another country. Mexico retains tax residency through the last year you spent in the country in the relevant tax period.

Digital nomads planning to spend 4–5 months in Mexico as tourists and then leave generally do not become tax residents. Those staying beyond 183 days and earning income are strongly advised to consult a Mexican contador.

ISR — Income Tax (LISR)

ISR (Impuesto Sobre la Renta) is the main direct tax in Mexico, levied on individuals and companies. For resident individuals, progressive rates range from 1.92% to 35%. The tax base is total annual income from all sources, adjusted for permitted deductions.

Permitted personal deductions (deducciones personales): medical expenses, education, mortgage interest, pension contributions, and donations to authorised NGOs. There is a cap on total deductions. An additional deduction is available for expenses backed by a CFDI (digital invoice) — proof of payment through an official electronic receipt.

Dividends received by an individual from a Mexican company are subject to an additional 10% withholding tax (retención), on top of the 30% corporate ISR already paid at company level. Capital gains on property sales are subject to ISR: the rate depends on the holding period and profit amount; there is an exemption for the sale of a primary residence subject to conditions (a five-year limit).

RFC for Foreigners

RFC (Registro Federal de Contribuyentes) is Mexico's taxpayer identification number. For individuals it consists of 13 characters (4 letters + 6 date-of-birth digits + 3 characters). An RFC is mandatory for: formal employment, self-employment and issuing CFDI invoices, mortgage loans and some banking products, registering a sole proprietorship (persona física con actividad empresarial), and buying or selling real estate.

A foreigner can obtain an RFC with any immigration status that permits economic activity. For tourists (FMM stamp only), obtaining an RFC is significantly harder — SAT generally requires an immigration document confirming the right to work or reside permanently.

How to get an RFC: (1) Prepare documents: passport + notarised translation, immigration document (tarjeta de residencia or work permit), CURP, comprobante de domicilio; (2) book an appointment at sat.gob.mx or visit the nearest SAT office as a walk-in; (3) after registration, receive the tax identification sheet (CIF) and, if needed, an e.firma (electronic signature for online declaration filing). In 2025–2026, SAT expanded online registration, but foreigners usually still need to attend in person.

IVA — Value Added Tax

IVA (Impuesto al Valor Agregado) is Mexico's VAT. The standard rate is 16% on most goods and services. A zero rate (0%) applies to unprocessed food, medicines, agricultural products, books, and some professional services. In the Northern Border Zone (municipalities along the US border), a reduced IVA rate of 8% applies (introduced in 2019).

Sellers and service providers must issue a CFDI (Comprobante Fiscal Digital por Internet) — a digital invoice — to document transactions. Buyers can request a CFDI from the seller to account for IVA deductions and personal tax deductions when filing an ISR declaration. The CFDI system is entirely digital and operates in real time.

For foreigners providing services in Mexico as self-employed or sole proprietors, VAT registration is mandatory once turnover exceeds the threshold. Small businesses with annual turnover up to MXN 3.5 million may use the simplified RESICO regime (Régimen Simplificado de Confianza) — with lower ISR rates and simplified reporting.

Predial & Other Local Taxes

Predial (impuesto predial) is an annual property tax collected by municipalities. The rate is approximately 0.1–0.3% of the cadastral value (valor catastral), which is generally well below market value. Predial is paid annually or quarterly; many municipalities offer a 10–20% discount for early lump-sum payment in January–February.

Beyond predial, property ownership generates: ISAI — a one-time tax at purchase (2–4% of value), paid by the buyer at registration; ISR on capital gains — when property is sold at a profit (rate depends on holding period and transaction amount); derechos (rights fees) for water supply and waste collection — minor municipal charges.

For foreigners: non-residents also pay predial as owners of Mexican property. When a non-resident sells property, they typically pay a fixed 25% ISR on gross proceeds or 35% on net profit — the buyer or notary withholds the applicable amount. The notary is legally required to withhold the tax at closing.

Annual Tax Declaration

Mexican tax residents must file an annual declaration (declaración anual) by 30 April of the year following the tax period. Declarations are filed electronically via the SAT portal (sat.gob.mx) using the RFC and password or e.firma (electronic signature).

Salaried employees whose only income source is their salary and whose employer correctly withheld ISR are generally exempt from filing — but they also forgo personal deductions (medical, mortgage). Voluntarily filing often results in a tax refund.

The self-employed and those with multiple income sources must file. The SAT system automatically pre-populates much of the data — CFDI invoices, bank transactions, payroll records — simplifying the process. The online "Declarasat" service walks users through the form step by step.

Foreign non-residents with Mexican-source income must pay withholding tax (retención) at source (withheld by the employer, client, or tenant). The withheld amount is final and a declaration is generally not required.

FAQ

See also

Sources

Tax rates and thresholds are updated annually. This guide is informational only and does not constitute tax advice. Consult a licensed Mexican contador before making tax-related decisions.