Tax Law in Mexico

Introduction

Mexican tax law is governed by the Federal Tax Code (Código Fiscal de la Federación, CFF), the Income Tax Law (Ley del Impuesto Sobre la Renta, LISR), the Value Added Tax Law (Ley del Impuesto al Valor Agregado, LIVA), and various other tax statutes. The Tax Administration Service (Servicio de Administración Tributaria, SAT) is the federal tax authority responsible for tax collection, enforcement, and taxpayer services. Tax disputes are resolved before the Federal Tribunal of Administrative Justice (TFJA).

Constitutional Framework

Article 31, Section IV of the Constitution establishes the obligation of all Mexicans to contribute to public expenditures through taxes. The principle of legality in taxation (nullum tributum sine lege) requires that taxes be established by law, with clear definitions of the taxable event, rate, taxpayers, and exemptions. The Constitution prohibits confiscatory taxes and requires proportionality and equity in tax burdens.

Income Tax

The LISR imposes income tax on individuals and corporations. Corporations are subject to a flat tax rate of 30% on their taxable income. Individuals are subject to progressive tax rates ranging from 1.92% to 35% on their net taxable income. The law provides for various deductions, exemptions, and tax credits, including deductions for charitable contributions, medical expenses, and retirement savings.

Value Added Tax

The LIVA imposes a value-added tax at a general rate of 16% on the sale of goods, provision of independent services, granting of temporary use of goods, and importation of goods and services. A reduced rate of 0% applies to exports, basic food items, medicines, and agricultural supplies. Certain activities, including education, healthcare, public transportation, and financial services, are exempt from VAT.

Tax Procedure and Enforcement

The CFF establishes tax procedure rules, including filing requirements, payment obligations, audits, penalties, and collection procedures. The SAT conducts tax audits (facultades de comprobación) to verify compliance and may impose penalties for non-compliance, including fines, surcharges, and criminal prosecution for tax fraud. Taxpayers have the right to challenge assessments through administrative appeal or nullity trial before the TFJA.

Conclusion

Mexican tax law establishes a comprehensive taxation system based on constitutional principles of legality, proportionality, and equity. The SAT administers income tax, VAT, and other federal taxes through a modern compliance and enforcement framework, while taxpayers have access to administrative and judicial review mechanisms.