Tax Impacts of Mexico's 2027 Economic Package

Mexico's Federal Executive submitted the 2027 Economic Package to the Congress of the Union on September 8, 2026. The package includes, among other measures, proposed amendments to Mexico's Income Tax Law (Ley del Impuesto sobre la Renta or LISR), the Federal Duties Law and the Customs Law, as well as the proposed Federal Revenue Law for fiscal year 2027 and a report regarding the exercise of the Federal Executive's constitutional authority in tariff matters for the Congress' consideration.

The most significant aspects of the 2027 Economic Package are described below.

LISR

Simplified Trust Regime

It is proposed to increase the annual income threshold for individuals to be taxed under the Simplified Trust Regime (Régimen Simplificado de Confianza or RESICO) from MX$3.5 million to MX$5 million, and for legal entities from MX$35 million to MX$50 million. This aims to expand the number of taxpayers that may qualify for and remain in this regime. For legal entities, RESICO would be optional.

For individuals, the restriction that prevented them from being taxed under RESICO again due to noncompliance with tax obligations would be eliminated. Consequently, taxpayers could rejoin the regime once their tax status has been regularized, provided they do not exceed the established income threshold.

In addition, those who ceased to be taxed under the regime because they exceeded the income threshold would be permitted to rejoin in subsequent fiscal years, provided they again meet the requirements set forth in the law and are current on their tax obligations.

New Limit on Allowable Deductions and Use of Tax Losses

For legal entities whose accruable income exceeds MX$50 million, both allowable deductions and tax losses from prior fiscal years would be subject to significant quantitative limits.

According to the explanatory memorandum, the measure is intended to combat companies that issue invoices for simulated transactions, taxpayers that claim tax benefits from those invoices and payroll-outsourcing schemes (nomineras).

Unlike the measures adopted in the 2026 tax reform, which focused on the Federal Tax Code (Código Fiscal de la Federación or CFF) and were directed specifically at persons who issue or give tax effect to false invoices, the proposed mechanism would operate as an objective, generally applicable limit that applies to all taxpayers falling within the regime's scope, regardless of whether they engaged in the conduct described in the explanatory memorandum or whether their deductions are fully supported and strictly indispensable.

Limit on Allowable Deductions

It is established that, when allowable deductions exceed 96.67 percent of accruable income, the deductions will be limited to an amount equal to 96.67 percent of said income. On the other hand, when the amount of deductions is less than 96.67 percent of the annual accruable income, only 99 percent of such amount will be deductible.

In this way, the proposal imposes a minimum tax-profit margin and would thereby require large companies to pay taxes even when their deductions in a fiscal year exceeded their income, generating significant cash-flow implications for taxpayers.

In this regard, there are still questions regarding the order in which the rules would apply and their interaction with the calculation of tax losses. In our view, the floor determined under this limitation does not correspond to the final taxable base to which the income tax (impuesto sobre la renta or ISR) rate must be applied. Paid employees' profit sharing (participación de los trabajadores en las utilidades or PTU) and losses from prior fiscal years should be able to reduce that base further.

Separately, the mechanism should not prevent the generation of tax losses. This is because the deductions are applied in full and the loss is generated under the ordinary rules, even though its carryforward utilization would be subject to the 50 percent limit in subsequent fiscal years, as discussed below.

The Mexican Tax Administration Service (Servicio de Administración Tributaria or SAT) took the same position in an information bulletin (tarjeta informativa) dated September 10, 2026, issued in response to a news report. The authority stated that it is false that the measure seeks to tax sales at 3 percent even where tax losses exist, clarifying that the control mechanism applies only to companies that determine taxable profit for the fiscal year.

Allowable deductions that could not be offset against income in a fiscal year as a result of applying these limits could be deducted in the following 20 fiscal years. However, the right to use them in subsequent fiscal years would be personal to the taxpayer that generated them, so it could not be transferred to another person, even through a merger or spinoff.

It should be noted that the remaining balance would again be subject to the same limit in the fiscal year in which it is sought to be used, so its effective recovery would depend on the legal entity generating a sufficient margin in subsequent years. In structures with narrow operating margins, such as distribution, marketing, low-value-added services or entities operating under guaranteed-remuneration arrangements, the remaining balance could accumulate indefinitely and, in practice, be unrecoverable.

Limit on the Use of Tax Losses

The measure also proposes to limit the use of tax losses carried forward from prior fiscal years. Under the proposal, tax losses could be offset only up to 50 percent of taxable profit, after the deduction cap has been applied. Any unused balance could be used during the following 20 fiscal years, subject to the same cap. Through transitional provisions, that same 20-year period would be extended to losses generated before the Decree enters into force, measured from the fiscal year in which they arose.

The general 10-year period under article 57 of the LISR would remain unchanged, so the extension to 20 fiscal years would apply only to taxpayers subject to the new regime.

Provisional Payments

For purposes of determining the 2027 provisional payments, taxpayers whose last filed annual return reported accruable income of more than MX$50 million would multiply their profit coefficient by a factor of 1.0658 when the deductions reported on that return did not exceed 96.67 percent of accruable income, or by a factor of 2.6162 when they did exceed that percentage. In addition, they could offset prior-year losses only up to 50 percent of the taxable profit determined in this manner. These adjustments would not apply to taxpayers excluded from the regime.

The 2.6162 factor could increase provisional payments far above the profit estimated for the fiscal year, directly affecting cash flow from January 2027 and creating a credit balance that would not be recoverable until the annual return is filed.

It is still uncertain whether taxpayers could request a reduction in provisional payments during the fiscal year under the terms currently provided in the LISR.

PTU

Taxable income for purposes of employee profit-sharing would be determined without taking these limits into account, so the mechanism would not increase the profit-sharing base. It would, however, widen the difference between taxable income for ISR purposes and taxable income for PTU purposes.

Excluded Taxpayers and Economic Continuity Rules

The proposal establishes that the following taxpayers, among others, would be excluded from the application of this regime:

• taxpayers taxed as coordinated entities (coordinados) and those in the primary sector
• taxpayers carrying out maquila operations, except with respect to income obtained from the sale of goods in Mexico
• taxpayers declared bankrupt
• insurance institutions, with respect to operations within their corporate purpose
• taxpayers applying benefits for immediate deduction of investments or additional deductions for training, certifications, utility models and patents, during the period in which the benefit applies and solely with respect to that benefit

The regime would also exclude taxpayers that have been registered with the Federal Taxpayer Registry (Registro Federal de Contribuyentes or RFC) for fewer than five fiscal years, except where economic continuity exists – that is, taxpayers that receive from a pre-existing legal entity assets, inventories, contracts, trademarks, customer portfolios or other assets indispensable to conducting similar activities, when they share partners or shareholders or those partners or shareholders directly or indirectly retain control or management.

This last exception would likewise not apply where the authority determines that a formation, merger, spinoff, liquidation, restructuring or sale of shares was carried out for the purpose of qualifying for the exception in question.

By means of a transitional provision, companies surviving or resulting from a merger or spinoff on or after September 8, 2026, would apply the new regime beginning January 1, 2027. It is noteworthy that the cutoff date is the date on which the bill was submitted, so it would apply to restructurings already completed or in process under the legislation then in force, which could raise retroactivity concerns.

Taken together, the mechanism represents a structural change in the determination of ISR, as it introduces for the first time a global limit on deductions detached from nature, indispensability and adequate support for each expenditure. Its implementation will require evaluating the effect on the effective tax rate and cash flow, reviewing the impact on deferred taxes and financial and contractual projections, and analyzing transactions or restructurings carried out on or after September 8, 2026, or planned for the coming months.

The measure includes a section justifying the constitutionality of the measures considering the principles of proportionality and tax equity, which foreshadows a contentious environment that affected taxpayers will need to analyze with appropriate technical support from a legal and accounting standpoint.

Additional Measures to Prevent Abuse in the Application of Specific Deductions

Aside from the foregoing control mechanism, three targeted amendments to the deduction regime are proposed, affecting financing transactions, payments to foreign residents and the timing for deducting advance payments.

Net Interest

It is proposed to reduce from 30 percent to 20 percent the proportion of adjusted taxable profit that serves as the ceiling for deducting net interest – any amount exceeding 20 percent would be nondeductible. The other elements of this deduction limitation regime that were previously in place, including the minimum exempt amount and the ability to utilize the excess during the following 10 fiscal years, would remain unchanged.

The impact would be immediate for leveraged companies, particularly those with intercompany financing or capital-intensive projects.

Payments to Foreign Residents

It is proposed that payments made to foreign residents will only be deductible in the fiscal year in which the corresponding consideration is paid and the withheld tax is remitted. Thus, accrued expenses could not be deducted until the consideration is paid and the income tax, if applicable, is remitted.

In addition to the amendment related to the timing of the deductibility of payments made to foreign residents, it is established that income tax amounts withheld from those payments will have to be remitted at the moment when the corresponding obligation accrues. This constitutes a new alternative time for remitting such withholdings, in addition to the existing requirement to remit them when the payment obligation is due or when the payment is effectively made, whichever occurs first.

It is also established that, for considerations paid in foreign currency, the withholding tax payment will be completed by making the conversion to Mexican currency at the moment in which the withholding is made. This situation could generate discrepancies between the exchange rate used for withholding purposes and the exchange rate used to determine the deductible amount for income tax purposes.

Finally, it is worth mentioning that these amendments can have significant tax implications for taxpayers making such payments, particularly payments made to foreign related parties in intercompany transactions, such as interest, royalties or rent. In the case of transactions involving periodic accruals of payment obligations (for example, on a monthly basis), the obligation to remit income tax withholdings would arise at the moment of accrual, rather than when the payment obligation is due or satisfied, as was previously the case. This could create cash flow issues for companies.

Thus, it will be important for taxpayers to review the current operations involving payments to foreign residents to determine when Income tax withholding obligations are triggered and when the corresponding tax deduction can be declared, in terms of the arrangements included in the corresponding agreements and support documentation. Taxpayers should also make any necessary adjustments to ensure compliance with the corresponding obligations. These actions would help mitigate any potential risk related to the deductibility of payments made to foreign residents.

Advances for Services and for the Temporary Use or Enjoyment of Assets

As proposed, advance payments made for services or for the temporary use or enjoyment of goods would no longer be deductible when paid. The deduction would be deferred until the fiscal year in which the service is actually received or the lease period elapses and, if the transaction spans more than one fiscal year, the deduction will apply only for the portion received or granted in each year.

In addition, the requirement to have the tax receipt for the advance in the fiscal year in which it was paid, as well as the tax receipt covering the entire transaction, would be retained. The rule would apply to advances made on or after its entry into force, and no second deduction would be allowed for amounts already deducted under the prior provisions.

Elimination of the Optional Regime for Groups of Companies

The Optional Regime for Groups of Companies was implemented in the 2014 tax reform as a transitional mechanism to wind down the Tax Consolidation Regime.

Its primary purpose was to provide organizational flexibility to business groups and, among other benefits, allow the deferral of ISR. After 13 years in effect, the bill states that the effects of the transition have been exhausted and that the regime has fulfilled its purpose; accordingly, its repeal is proposed.

To regulate the transition of taxpayers currently subject to this regime, various provisions are established.

Capital Contribution Account

As mentioned in the proposal, the tax authority has detected that, through the capitalization of liabilities, certain taxpayers contribute to share capital not only the principal amount of an obligation, but also accrued interest and the corresponding VAT, thereby eroding the tax base when reimbursements are made. It has also been observed that some taxpayers seek to increase the Capital Contribution Account (Cuenta de Capital de Aportación or CUCA) by treating the assignment or transfer of collection rights or negotiable instruments as a capital contribution, even though these do not immediately extinguish the obligation. It should be noted that this proposal reflects what court precedents had already established.

Accordingly, the CUCA balance reform would have the following effects:

• Capitalization of Liabilities. Accrued but unpaid interest and the corresponding VAT would not be included as contributed capital.
• In-Kind Contributions. In-kind contributions consisting of accounts receivable, assignments of collection rights or negotiable instruments would be added to CUCA only when they are collected, and only up to the amount collected in cash.
• Supporting Documentation. Capital increases would have to be supported by documentation in accordance with the Federal Tax Code to be added to CUCA.
• Capital Reductions. It is clarified that capital reductions would reduce CUCA when the reimbursement is paid or the capital reduction is carried out, as applicable. In this regard, we believe that if capital is returned through an account receivable, CUCA should not be reduced until the corresponding partner or shareholder collects it.
• Offsetting Losses. The provisions of Article 78 of the LISR would apply equally to reimbursements loss offsets and capital reductions, regardless of whether shares are cancelled.

Gain on the Sale of Shares

As a result of the proposed changes regarding CUCA, the rules for determining the gain on the sale of shares would be adjusted, clarifying that interest and VAT arising from capitalized liabilities would not form part of the documented acquisition cost of the shares.

Additionally, in the case of in-kind contributions consisting of accounts receivable, collection rights or negotiable instruments, their inclusion in the documented acquisition cost would be recognized only when those assets are collected and only up to the amount collected.

Net Tax Profit Account

For purposes of determining net tax profit, current Article 77 of the LISR provides that the fiscal result for the year must be reduced by items that are nondeductible for ISR purposes, except for sections VIII and IX of Article 28, as well as PTU.

The explanatory memorandum states that the authority has detected that some taxpayers incorrectly interpret article 77 by improperly limiting the concept of "nondeductible items" only to those identified in Article 28 and failing to deduct expenditures that do not meet the deductibility requirements set forth in other tax provisions. This practice causes an artificial increase in the balance of the Net Tax Profit Account (Cuenta de Utilidad Fiscal Neta or CUFIN).

Accordingly, the following amendments are proposed:

• Section II of Article 77. It is clarified that nondeductible items include both those identified in article 28 of the LISR and "those that do not meet the tax requirements set forth in the applicable provisions."
• Fifth Paragraph of Article 77. The same clarification is made for purposes of determining whether there is a difference (negative net taxable income) that must be deducted from the CUFIN balance, adding a reference to items that do not meet the tax requirements set forth in the applicable provisions.

This reform significantly expands the scope of items that must be deducted in determining CUFIN. The concept will no longer be limited to items expressly identified in article 28 of the LISR (nondeductible by express provision) – it will also include any expenditure that is deductible by its nature but fails to meet the deductibility requirements such as expenses that are not supported by a digital tax receipt (comprobante fiscal digital por internet or CFDI), or those that do not comply with deductibility requirements established in Article 27 of the LISR, among others.

Transitional Provisions of the LISR

Through transitional effective-date provisions, it is proposed to give statutory status to various tax incentives currently provided in Federal Executive decrees, so that they continue during fiscal years 2027 through 2030. The incorporated programs include the incentives under Plan México, the Economic Development Hubs for Well-Being (Polos de Desarrollo Económico para el Bienestar), and those applicable to developers and circular-economy companies. In general terms, the benefits consist of the immediate deduction of investments in new fixed assets and additional deductions for training and innovation expenses, subject to compliance with the requirements established for each program.

Federal Revenue Law

Repatriation of Capital

Individuals and legal entities resident in Mexico, as well as foreign residents with a permanent establishment, may repatriate funds held abroad as of September 8, 2026, by paying a 7.5 percent rate on the total amount repatriated, with no deductions. As a condition to apply this benefit, the funds must be invested in Mexico for a minimum period of three years.

The deadline for repatriation is December 31, 2027; funds brought into Mexico during the first half of 2027 must be invested no later than December 31, 2027, while those brought in during the second half must be invested no later than June 30, 2028.

If dividends are distributed or capital reimbursements derived from the repatriated funds are made during the three-year investment period, a 10 percent ISR withholding will apply. Recognized investment destinations include fixed assets, development hubs, Plan México and government bonds, among others.

Income Tax and VAT Withholdings on Digital Platforms

For income tax purposes, it is proposed that digital platforms withhold 2.5 percent from legal entities that sell goods or provide services through them. If the legal entity does not provide its RFC, the withholding rate would be 20 percent.

Likewise, for VAT purposes, 100 percent of VAT would be withheld from foreign residents without a permanent establishment in Mexico who sell goods in Mexico, and from those who receive deposits for their operations in bank accounts located abroad. These measures seek to close tax-evasion opportunities identified in the e-commerce sector.

Withholding Obligations for Crowdfunding Institutions

With respect to crowdfunding institutions (instituciones de financiamiento colectivo), the proposal would require them to withhold and remit 20 percent ISR on nominal interest paid to individuals and legal entities.

Additionally, a 16 percent VAT withholding is proposed on the nominal amount of accrued interest. The VAT withholding would be creditable by the taxpayer paying the interest, pursuant to article 5, section IV of the VAT Law (Ley del Impuesto al Valor Agregado).

Tax Regularization Program

The continuation of the tax regularization program is proposed. The program would now apply to individuals and legal entities whose total income in 2025 did not exceed MX$300 million and have definitive or accepted tax assessments derived from omissions in the payment of their own federal taxes, withheld or passed through taxes, as well as government charges and fines.

The incentive consists of a 100 percent waiver of fines, surcharges, and collection expenses, provided that payment is made in a single installment no later than December 31, 2027. Taxpayers against whom a criminal complaint has been filed, an arrest warrant has been issued, or who are subject to criminal proceedings or have a final conviction for tax crimes are excluded. Mexican states and municipalities may also take advantage of this benefit.

Tax Incentive for Initial Public Offerings

A 10 percent Income tax rate is proposed on the gain derived from the sale of shares in initial public offerings (IPOs) conducted on stock exchanges authorized in Mexico. The incentive would benefit individuals who reside in Mexico, foreign-resident individuals and legal entities without a permanent establishment and foreign transparent entities. Its incentive is subject to a limit, as it applies up to an issuer market value of MX$50 billion, and the general rate applies to any excess.

In addition, a participation limit of up to 25 percent of the issuer's paid-in shares is proposed, and the rate under article 152 of the LISR would apply to any excess. The provision includes rules for dual offerings in Mexico and recognized foreign markets and is incorporated directly into the LIF with the intention that it be replicated for fiscal years 2028 through 2030.

Special Tax on Production and Services: Control Regime for Gasoline and Diesel Sales

The initiative proposes a control regime related to the Special Tax on Production and Services (Impuesto Especial Sobre Producción y Servicios or IEPS) for people who sell gasoline and diesel and are not manufacturers, producers or importers. In place of the exemption currently applicable to them, they would be required to pay the tax using the applicable rates for each type of fuel – without any incentive, reduction or credit – on the positive difference between the units sold and those purchased during the month, by filing a return no later than the 17th day of the following month.

The tax could not be passed on to the purchaser or included in the price, and the authority would be empowered to review the difference based on inventory controls, volumetric controls, tax receipts, and customs declarations (pedimentos). According to the explanatory memorandum, the purpose is to identify those selling more fuel than they purchase, without taxing legitimate differences arising from ordinary inventory management that are documented. Because the tax could not be passed on, the taxpayer would bear the charge directly; and because the assessment depends entirely on consistency among inventories, volumetric records, CFDIs, customs declarations, differences attributable to shrinkage, equipment calibration or transit times could result in tax being due.

7 Percent VAT for RESICO Taxpayers

It is proposed that individuals and legal entities taxed under RESICO may elect to pay VAT at a seven-percent rate on the total amount of taxable consideration collected, without being required to maintain VAT accounting records.

Taxpayers exercising this option could not credit VAT charged to them or VAT paid on imports, and the monthly payments would be final; they would only be required to issue and retain tax receipts.

Extension of the Deadline to Guarantee Tax Liabilities in a Revocation Appeal

With respect to the guarantee of tax liabilities, it is proposed that taxpayers filing a revocation appeal (recurso de revocación) will continue to have six months to guarantee the tax liability, rather than being subject to the original deadlines.

Withholding Rate on Interest

The measure proposes to set the annual withholding rate on interest paid by the financial system at 0.68 percent, replacing the 0.90 percent rate in effect for 2026. The calculation methodology considers the 28-day Federal Treasury Certificate's nominal rate, average annual inflation and the effective ISR rate applicable to individuals with financial income.

Surcharge Rate

The proposal establishes that the surcharge rates applicable during fiscal year 2027 should be as follows:

• 38 percent per month on outstanding balances under an extension
• 42 percent per month for installment payments over terms of up to 12 months
• 63 percent per month for terms of more than 12 and up to 24 months
• 97 percent per month for terms exceeding 24 months or deferred payment

Other Relevant LIF Points

The LIF also includes the following provisions:

• Tax Regime for State-Owned Companies. Mexican Petroleum (Petróleos Mexicanos or PEMEX) and the Federal Electricity Commission (Comisión Federal de Electricidad or CFE) would be required to pay taxes and ancillary charges, except for ISR.
• LISR Title III Verification Program.The SAT would implement a verification and audit program aimed at nonprofit legal entities.
• Exemption from the Customs Processing Duty on Natural Gas Imports. Natural gas imports would be exempt from the Customs Processing Duty.
• Tax Incentives for the Agricultural Sector. The IEPS incentives for diesel/biodiesel applicable to road transport operators and the agricultural sector would be maintained, with a reduction in the income cap for highway concessionaires from MX$300 million to MX$250 million.
• Deductibility of Uncollectible Receivables of Credit Institutions. Treatment would be harmonized with that applicable to other taxpayers, eliminating the special regime.

Federal Duties Law (Ley Federal de Derechos)

Immigration Services

The bill proposes a 35 percent increase in the fee for visitors without a permit to engage in remunerated activities, commonly referred to as the tourist fee, bringing it to MX$1,334.80. It also proposes changing the allocation of the amounts collected: 50 percent would go to the Ministry of National Defense (Secretaría de la Defensa Nacional or SEDENA), 26 percent to the National Institute of Migration – to finance technological infrastructure and border security – and 24 percent to the Federal Treasury.

With respect to visas, the proposal would harmonize the fees for ordinary visas and long-term visitor visas at MX$1,639.80, representing an increase of 66 percent for the former and 153 percent for the latter.

Airspace

A 10 percent increase is proposed in the fees for the use, enjoyment or exploitation of Mexican airspace. According to the explanatory memorandum, the adjustment seeks to close the gap with the average for Latin American countries and update fees that remained substantially unchanged for an extended period.

National Banking and Securities Commission: Inspection and Supervision of the Securities Market

The bill proposes increasing the duties for inspection and supervision of securities issuers by 16 percent, with the aim of making up the accumulated shortfall over the past 10 years.

National Commission for the Retirement Savings System: New Duty Regime for Retirement Fund Administrators

It is proposed to replace the fee of MX$0.2877 per MX$1,000 of assets under management with a rate of 0.1750 per thousand. This change seeks to eliminate the double burden affecting the variable fee, which grew simultaneously because of an increase in the base and inflationary adjustments. The bill includes a transitional rule under which, during fiscal years 2027 through 2029, the total amount of the duty may not be less than the amount paid in the immediately preceding fiscal year.

Materials Extraction

It is proposed to eliminate geographic zoning (Zone 1 and Zone 2) for charging duties on the extraction of materials from national watercourses, basins and deposits. Instead, the bill would establish uniform fees by type of material: gravel, sand, clay and silt, raw materials, stone and others.

Tariff Report

The package is accompanied by the report through which the Federal Executive submits to Congress for approval the exercise of its tariff authority between September 9, 2025, and September 8, 2026. Among the reported measures, the following stand out:

• changes to ad valorem rates of 156 percent and 210.44 percent in eight tariff lines in the sugar sector
• tariff amendments affecting 185 tariff lines in sectors such as chemicals, textiles, steel, auto parts and electrical equipment
• adjustments to the Sectoral Promotion Programs for the electrical, electronics and automotive industries
• elimination of 33 tariff lines from the decree exempting basic-basket goods from tariffs
• a tariff-rate quota for the importation of rails
• extensions of the decrees on used vehicles and the Chetumal free zone

For more information or questions regarding this alert, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.