Understand Corporate Income Tax System in Mexico

Corporate Income Tax in Mexico

Mexico’s corporate tax regime is codified in the LISR and applies to resident companies on worldwide income and to non-residents on Mexican-source income.

• Headline rate: 30% corporate income tax (Art. 9 LISR).
• Dividend distributions: additional 10% ISR when profits are paid out to shareholders (domestic individuals and most non-residents), subject to treaty relief and tracking of CUFIN; corporate-level taxation rules apply when distributing untaxed earnings (Art. 140 LISR).
• Scope: residents taxed on worldwide income; non-residents taxed on Mexican-source income or PE-attributable income (Título V LISR).

Mexican Company Forms and Share Capital

Selecting the appropriate Mexican legal form requires aligning liability, governance, and capitalization under the Ley General de Sociedades Mercantiles (LGSM) with your business purpose.

S.A. de C.V. — Stock Corporation

The S.A. de C.V. is the default corporate vehicle for growth and financing flexibility, suitable for operating groups and scale-ups.

• Shareholders: minimum 2.
• Capital: market practice and many references indicate a minimum fixed capital of MXN 50,000 (20% paid in cash at incorporation); variable capital allows future increases. Confirm current practice with notary at closing.
• Governance: board or sole administrator; nominative shares.

S.A.P.I. de C.V. — Investment Promotion Corporation

The S.A.P.I. de C.V. offers venture-friendly governance (tag/drag, preferred classes) and is often used before a listing.

• Shareholders: minimum 2.
• Capital: no statutory minimum in practice (set by bylaws); variable capital recommended for rounds.
• Use case: Private equity (PE)/Venture capital (VC) structures, employee equity plans.

S. de R.L. de C.V. — Limited Liability Company

The S. de R.L. de C.V. is tax-transparent for many foreign jurisdictions and offers member-level flexibility.

• Partners: 2–50 members (“partícipes”).
• Capital: no statutory minimum; quotas not freely transferable without member consent.
• Use case: joint ventures; pass-through alignment for certain foreign tax systems (subject to local advice).

S.A.S. — Simplified Joint Stock Company

The S.A.S. enables single-shareholder incorporations with streamlined online setup, but practical limits apply for foreign founders.

• Shareholders: 1+ individuals (requires Mexican e-signature/e.firma).
• Capital: no statutory minimum; revenue caps and restrictions apply.
• Note: often unsuitable if all promoters are non-resident without Mexican e-sign credentials.

Other Forms and Branches

Professional and civil arrangements (S.C., A.C.) and foreign branches are options in specific cases.

• Branch: no capital at branch level; registration and accounting localization required; branch profits taxable in Mexico.

Tax Base, Deductions, and Losses

Mexico determines taxable profit from accounting results with adjustments per LISR; authorized deductions require strict nexus, substantiation, and withholding compliance.

• Net operating losses: carry forward generally up to 10 years (no carry back).
• Withholding compliance: many deductions hinge on correct WHT collections and e-invoicing (CFDI).

Interest Limitation and Thin Capitalization

Mexico limits base erosion through an EBITDA-based cap and a related-party thin-cap rule.

• EBITDA cap: net interest generally limited to 30% of adjusted taxable income, with MXN 20m group de minimis; excess may carry forward (LISR, Art. 28, fracc. XXXII).
• Thin cap (related-party cross-border debt): 3:1 debt-to-equity; interest above that threshold is non-deductible when paid to foreign related parties.

Withholding and Profit Distributions

Distributions and cross-border payments are subject to domestic WHT, with relief via treaties when conditions are met.

• Dividends: additional 10% ISR at distribution stage (tracking of CUFIN; exemptions may apply to pre-2014 earnings or treaty-reduced outcomes).
• Interest, royalties, services: WHT rates vary by payment type, beneficiary status, and treaty terms.

Mexico–Luxembourg Treaty

The Mexico–Luxembourg income tax treaty—read with the Multilateral Instrument (MLI)—allocates taxing rights and provides reduced rates on certain cross-border payments.

• Coverage: business profits taxable in residence state unless attributable to a PE in the other state; reduced WHT on dividends/interest/royalties per treaty.
• Anti-abuse: Principal Purpose Test (PPT) under the MLI applies.

Luxembourg SOPARFI 

Luxembourg’s SOPARFI—fully taxable under the LIR—can, in appropriate cases, benefit from participation exemptions on qualifying dividends and capital gains, and access Luxembourg’s treaty network.

• Use case: Luxembourg holding or financing company at the top or alongside Mexican operations for EU capital flows, subject to genuine substance, transfer pricing, and Principal Purpose Test (PPT) .
• Caveat: structure must reflect commercial purpose; treaty and EU anti-abuse rules are actively enforced.

Damalion Company Formation (Mexico & Luxembourg)

Damalion facilitates compliant, efficient setup for Mexico and Luxembourg vehicles.

• Mexico: S.A. de C.V., S.A.P.I. de C.V., S. de R.L. de C.V., S.A.S., and branches—name clearance, bylaws, notary coordination, registrations (RFC, SAT, IMSS as needed). We also help entrepreneurs and investors to get their RFC Number to facilitate their business with Mexico.
• Luxembourg: SOPARFI and S.à r.l., S.A. and more— registration, governance with independent directors, and tax registrations aligned with EU rules. Please contact your Damalion expert now.