Mexico’s federal tax system sorts every taxpayer into one of several Mexican tax regimes based on how they earn income, and the regime you fall under sets your rates, deductions, filing frequency, and invoicing duties. The Tax Administration Service (SAT) runs the classifications. The main categories are the Simplified Trust Regime (RESICO) for small operators, the Business and Professional Activities regime for higher-earning self-employed workers, the Salaries and Wages regime for employees, the Leasing regime for landlords, the Digital Platforms regime for gig workers, and the General Regime for Legal Entities that applies to companies. Value-added tax sits on top of all of them.
Simplified Trust Regime (RESICO) for Individuals
RESICO, the Régimen Simplificado de Confianza, is the lowest-tax option for freelancers, sole proprietors, and small business owners. To qualify, gross annual income cannot exceed 3.5 million pesos. Rates run from 1% to 2.5% of gross income:
- Up to 300,000 pesos: 1.0%
- Up to 600,000 pesos: 1.1%
- Up to 1,000,000 pesos: 1.5%
- Up to 2,500,000 pesos: 2.0%
- Up to 3,500,000 pesos: 2.5%
The tradeoff is that you cannot claim itemized deductions. Tax is calculated on gross income, not profit. For small operators with modest expenses relative to revenue, the math still comes out well ahead of the traditional regime.
Foreigners living in Mexico can use RESICO if they hold a valid temporary or permanent resident card and are registered in the Federal Taxpayer Registry. Foreign residents with a permanent establishment in Mexico cannot apply RESICO to income attributed to that establishment.
Losing RESICO Status
Cross the 3.5 million peso threshold and you migrate permanently to the general business regime the following month. There is no coming back. The SAT also removes taxpayers who fail to issue electronic invoices (CFDIs), miss three consecutive monthly filings, or carry unresolved tax debts. Staying in RESICO takes ongoing compliance, not just meeting the income cap.
Business and Professional Activities Regime
Individuals who earn too much for RESICO, or whose activities are excluded from it, land in the Régimen de Actividades Empresariales y Profesionales. This is the traditional framework for self-employed professionals like doctors, lawyers, architects, and consultants, along with shop owners and other entrepreneurs.
You calculate tax by subtracting authorized deductions from total income and running the result through Mexico’s progressive individual table. Marginal rates start at 1.92% on the first 10,135 pesos of monthly taxable income and climb to 35% on income above roughly 5.1 million pesos annually.1PwC Tax Summaries. Mexico – Individual – Taxes on Personal Income Deducting rent, supplies, employee salaries, and depreciation often produces a lower effective rate than the headline brackets suggest, but the recordkeeping burden is substantially heavier than RESICO.
Taxpayers in this regime file monthly provisional ISR payments and an annual return, keep detailed electronic accounting, and issue CFDIs for every transaction.
Salaries and Wages Regime
Income under a formal employment relationship falls under the Régimen de Sueldos y Salarios. This covers salaries, overtime, bonuses, and statutory benefits tied to an employment contract. Your employer withholds income tax from each paycheck at rates between 0% and 35% and remits the amounts to the SAT.2PwC. Mexico – Corporate – Withholding Taxes
Most salaried employees do not file monthly returns. You must file an annual return by April 30 if your total compensation for the year exceeds 400,000 pesos.3PwC Tax Summaries. Mexico – Individual – Tax Administration You also need to file if you had two or more employers during the year, or if you want to claim personal deductions to get a refund.
Personal Deductions on the Annual Return
The annual return is where salaried employees can recover part of the tax withheld through the year. Mexico allows deductions for medical, dental, psychologist, and nutritionist fees paid by card or transfer rather than cash, health insurance premiums, inflation-adjusted home mortgage interest, and charitable contributions to authorized organizations. Charitable donations are capped at 7% of your prior year’s taxable income.4PwC Tax Summaries. Mexico – Individual – Deductions
Tuition for yourself, your spouse, children, or parents is deductible up to annual limits of 14,200 to 24,500 pesos per student depending on the education level. University tuition is not deductible.4PwC Tax Summaries. Mexico – Individual – Deductions
Total personal deductions are capped at the lesser of 15% of your gross annual income or five times the annual UMA. For 2026, that UMA-based cap works out to approximately 213,973 pesos. Retirement account contributions and certain education expenses sit outside this overall cap and have their own separate limits.4PwC Tax Summaries. Mexico – Individual – Deductions
Real Estate Leasing Regime
Rental income from residential or commercial property goes under the Régimen de Arrendamiento. Every rent payment requires issuing a CFDI to the tenant. The SAT uses those receipts to track rental income, and tenants need them to claim any related deductions on their own returns.
Landlords have two choices for calculating taxable income. You can deduct actual documented expenses like maintenance, property taxes, insurance, and depreciation, or skip the paperwork and claim a flat 35% blind deduction against gross rental income plus any real estate taxes paid.5PwC Tax Summaries. Mexico – Individual – Income Determination The blind deduction rewards simplicity; owners with heavy renovation or maintenance costs generally do better itemizing.
Failing to issue CFDIs carries a consequence beyond SAT penalties. Under certain civil code provisions, a landlord who cannot produce proper invoices may lose the ability to pursue eviction proceedings against non-paying tenants.
Digital Platforms Regime
The Régimen de Actividades Económicas con Ingresos a través de Plataformas Tecnológicas covers people who earn through ride-sharing apps, food delivery services, online marketplaces, and similar digital platforms. The platforms themselves are legally required to withhold both income tax (ISR) and value-added tax (IVA) from each payment before the money reaches the worker.
If your annual platform income stays below 300,000 pesos, you can elect to treat those withholdings as your final tax payment. No annual return, no additional calculations. Above that threshold, the withholdings become provisional credits against your total liability, and you file like any other self-employed taxpayer under the business activities regime.
The 300,000 peso line is easy to cross with full-time platform work. The shift from automatic withholding to a full return with recordkeeping catches gig workers off guard, so track cumulative earnings through the year.
General Regime for Legal Entities
Corporations, limited liability companies (S. de R.L.), stock corporations (S.A. de C.V.), and other for-profit legal entities fall under the Régimen General de Ley Personas Morales. Businesses calculate taxable profit by subtracting authorized expenses and prior-year losses from total accrued income. The federal corporate income tax rate is a flat 30% on net profit.6PwC Worldwide Tax Summaries. Mexico – Corporate – Taxes on Corporate Income
Legal entities keep electronic accounting records, issue CFDIs for all transactions, and file monthly informative returns on third-party dealings. Penalties for missing required electronic documents add up quickly across multiple violations.
Non-Profit Entities
Charities, religious organizations, professional associations, and similar groups register under Personas Morales con Fines No Lucrativos. These entities pay no income tax on revenue from primary mission-related activities but must meet strict reporting requirements to keep exempt status. Losing that status through late filings, improper documentation, or activities outside the stated purpose triggers retroactive tax liability at the standard 30% corporate rate.
Payroll Obligations for Employers
Any legal entity with employees takes on payroll obligations beyond withholding ISR. Employers register workers with the Mexican Social Security Institute (IMSS) and make bimonthly contributions covering health insurance, disability, retirement, and other benefits. Total employer IMSS contributions typically range from 20% to 35% of the employee’s integrated daily salary depending on industry risk classification and salary level.
Employers also contribute 5% of each worker’s integrated salary to the federal housing fund (INFONAVIT), which finances employee home loans. States impose their own payroll tax, the Impuesto Sobre Nóminas (ISN), at rates from roughly 2% to 4%. The true cost of an employee reaches well beyond the gross salary on the contract.
Value Added Tax (IVA) Across Regimes
Nearly every taxpayer in Mexico, regardless of income tax regime, also handles value-added tax. The standard IVA rate is 16% on the sale of goods and services, lease payments, and imports.7PwC Worldwide Tax Summaries. Mexico – Corporate – Other Taxes Businesses in designated northern and southern border municipalities qualify for a 50% reduction, bringing the effective rate to 8% for transactions inside those zones.
Some transactions are fully exempt from IVA, meaning no tax is charged and the seller cannot recover input IVA credits. These include basic unprocessed food, education services, medical services and prescription medicines, and printed books and newspapers. Other transactions are zero-rated: no IVA is charged to the buyer, but the seller can still claim credits for IVA paid on inputs. Exports and certain agricultural supplies are zero-rated.
IVA returns are filed monthly, with payment due by the 17th of the following month.7PwC Worldwide Tax Summaries. Mexico – Corporate – Other Taxes The calculation runs on a cash-flow basis: subtract IVA paid on deductible purchases from IVA collected on sales, and remit the difference. If input credits exceed collected IVA, common for exporters, you can request a refund.
Registering for a Regime with the SAT
Before approaching the SAT, gather your CURP (the national population registry code issued to all residents, including foreigners), a recent proof of address such as a utility bill or bank statement dated within the last three months, and a valid photo ID.
Registration begins online through the SAT’s website with a pre-registration form that produces a folio number. You then schedule an in-person appointment at the nearest SAT office (Administración Desconcentrada de Servicios al Contribuyente) to finalize the process within ten days of the electronic application.8Gobierno de Mexico. Inscription at the Federal Taxpayer Registry At the appointment, you verify your identity, submit documents, and receive your RFC number, the Federal Taxpayer Registry code required for all legal financial operations in Mexico.
You also need an e.firma, a digital signature consisting of encrypted certificate files and a private password, required for signing returns and using the SAT’s online portal. During registration, a questionnaire identifies your specific economic activities and determines your reporting frequency, applicable rates, and assigned regime.
If your situation changes, say you start a side business, begin renting property, or your income crosses the RESICO threshold, you update your regime through the SAT portal or at an office. The SAT cross-references reported income against bank deposits, CFDI records, and third-party data. A mismatch between your registered regime and your actual activities is one of the fastest ways to draw an audit.