VAT and Sales Tax in Mexico

What is IVA and what is the standard rate?

IVA (Impuesto al Valor Agregado) is Mexico's value-added tax, governed by the Ley del Impuesto al Valor Agregado (LIVA). It has applied at a general rate of 16% since 2014 on the sale of goods, provision of services, the temporary use of goods (leasing), and imports into Mexico. [1] The tax operates on a destination basis: consumption inside Mexico is taxed; exports are zero-rated. Every registered taxpayer in the supply chain adds IVA on their outputs and credits the IVA paid on their inputs -- a mechanism called acreditamiento -- so the economic burden falls on the final consumer rather than accumulating at each production stage. Mexico uses a cash-flow basis: IVA becomes payable when payment is actually received, not when an invoice is issued. [2]

What is the 8% border-region stimulus and who qualifies?

Taxpayers whose tax domicile is registered in qualifying northern or southern border municipalities benefit from a fiscal stimulus (estimulo fiscal) that effectively halves the IVA rate to 8%. The northern border strip -- covering municipalities in Baja California, Sonora, Chihuahua, Coahuila, Nuevo Leon, and Tamaulipas adjacent to the United States -- has applied the 8% rate since 1 January 2019. Southern border zones (parts of Chiapas, Tabasco, Campeche, and Quintana Roo, bordering Guatemala and Belize) were added in 2021. [3]

The current decree, published in the Diario Oficial de la Federacion (DOF) on 31 December 2025, extended the stimulus through 31 December 2026 -- a single-year renewal unlike prior multi-year extensions. [3] To qualify, a business must be enrolled in the SAT Beneficiaries Registry, conduct operations exclusively within the delimited zone, and issue CFDI invoices carrying the correct SAT catalog code for the 8% rate. Failure to issue correct CFDIs can result in reversal of the benefit.

What supplies are zero-rated at 0%?

Article 2-A of LIVA lists the zero-rated categories. Zero-rating means the supplier charges no IVA on their output but retains the right to credit (or claim a refund of) all IVA paid on related inputs -- this distinguishes zero-rated from exempt supplies. [2] Key zero-rated categories:

• Basic foodstuffs: unprocessed agricultural produce, staple items including tortillas, bread, milk, eggs, masa (corn dough), fruit and vegetables, and most non-prepared foods
• Prescription medicines and qualifying over-the-counter drugs: pharmaceutical products that require a prescription
• Agricultural inputs: seeds, fertilizers, pesticides, and certain farming equipment used in primary production
• Books, newspapers, and magazines: all editions regardless of medium
• Exports of goods and services: goods physically leaving Mexico and qualifying services consumed abroad

By contrast, exempt supplies -- land sales, residential rentals, financial services (bank loans, insurance), healthcare and hospital services, and most educational services -- carry no output IVA but also carry no right to input-credit recovery. A business making only exempt supplies absorbs its input IVA as a cost. [2]

How do monthly IVA returns and acreditamiento work?

IVA-registered taxpayers file a definitive monthly IVA declaration through the SAT portal. The deadline is the 17th day of the month following the reporting period -- for example, the April IVA return is due by 17 May. [1] A nil return must still be filed in months with no activity.

The mechanics of acreditamiento:

1. Calculate IVA cobrado (output IVA collected from customers during the month)
2. Subtract IVA acreditable (input IVA paid to suppliers and on imports, provided the related purchases are deductible for income-tax purposes and supported by a valid CFDI 4.0 electronic invoice)
3. The net difference is remitted to SAT; if inputs exceed outputs, the saldo a favor (credit balance) can be carried forward to offset future months or claimed as a cash refund [2]

Alongside the monthly return, most IVA-registered entities file a DIOT (Declaracion Informativa de Operaciones con Terceros) -- a monthly informative report listing IVA paid to each third-party supplier. SAT cross-references DIOT data between buyer and seller to identify discrepancies. Since August 2025 the DIOT must be submitted through SAT's updated online platform. [4]

IVA rates at a glance

How does IVA apply to digital services provided by foreign companies?

Since 1 June 2020, foreign digital-service providers without a physical presence in Mexico have been required to register with SAT, collect 16% IVA from Mexican consumers, and remit it monthly. [5] The obligation arises under Articles 18-B and 18-J of LIVA and applies regardless of transaction volume -- there is no registration threshold. Covered services include streaming media, software-as-a-service subscriptions, online marketplaces, mobile applications, distance learning, and online advertising. Electronic books, newspapers, and magazines are excluded (they are zero-rated).

As of early 2026, over 275 foreign companies appeared on SAT's public registry of compliant non-resident digital providers. The 2026 tax reform (Article 30-B of the Codigo Fiscal de la Federacion and Rule 2.9.21 of the Miscellaneous Tax Resolution) added a new real-time data-access obligation: all in-scope digital platforms must grant SAT permanent online access to their transactional records within one day of each transaction, with access credentials submitted to SAT by 30 April 2026. [5] Foreign providers registered under this regime cannot recover Mexican input IVA and must maintain records for five years.

What is IEPS and how does it interact with IVA?

IEPS (Impuesto Especial sobre Produccion y Servicios) is Mexico's excise tax, levied on the production or importation of specific categories of goods before IVA is applied. Because IEPS forms part of the taxable base for IVA purposes, both taxes layer on the same transaction. [1] Current rates effective 1 January 2026 include:

• Tobacco and cigarettes: 200% ad valorem (raised from 160% in the 2026 fiscal package)
• Alcoholic beverages: 26.5%, 30%, or 53% depending on alcohol content
• Sugar-sweetened beverages: MXN 3.08 per litre (raised from MXN 1.64 in 2025)
• Non-caloric sweetened drinks: also subject to IEPS from 2026 under the health-tax reform
• Junk food (high-calorie snacks): 8%
• Telecommunications services: 3%
• Fossil fuels (gasoline, diesel): variable quota per litre, adjusted monthly by the government [1]

For businesses in taxable IEPS categories, IEPS is creditable against IEPS payable on outputs -- it is not creditable against IVA.

How does RFC registration work?

The RFC (Registro Federal de Contribuyentes) is Mexico's federal taxpayer identification number, administered by SAT. Any individual or legal entity that carries on commercial activity, provides services, or employs workers in Mexico must obtain an RFC. Registration is done through the SAT portal (sat.gob.mx) or at a SAT service centre, and no minimum revenue threshold applies. [4] The RFC is required to issue or receive valid CFDI electronic invoices, file tax returns, open business bank accounts, and enter into most commercial contracts. Foreign digital-service providers must also obtain an RFC as part of their non-resident registration.

For questions about RFC registration requirements specific to your business structure, consult a qualified tax professional.

See also: Mexico country overview for corporate income tax rates, treaty network, and broader filing obligations. For cross-border filing tools, /go/tax1099 provides US-side 1099 workflows relevant to US businesses with Mexican suppliers.

The information on this page is for general educational purposes only. Individual circumstances vary. Consult a qualified tax professional before making decisions about IVA registration, rate classification, or compliance obligations in Mexico.