Mexico Tax Reform on Big Firms Clears House

MEXICO · ECONOMY · TAXES

Mexico tax reform plans for 2027 cleared the lower house of Congress on Wednesday 14 October, capping how much large companies can deduct. The rules reach big firms across Mexico, including many subsidiaries of US companies, while sparing export-assembly plants.

The Chamber of Deputies approved the bill by 322 votes to 115 and sent it to the Senate, El Universal and El Financiero reported. The government says the reform targets evasion through fake invoices and should raise more revenue.

What the Lower House Approved

The Mexico tax reform rewrites parts of the income tax law, known by its Spanish initials ISR, and belongs to the 2027 economic package. That package also covers the federal revenue law and the budget, described in Mexico’s 2027 budget plan.

Deputies from Morena, President Claudia Sheinbaum’s left-wing party, and its allies the Labour Party and the Green Party voted in favour, El Universal reported. Against were the centre-right National Action Party (PAN), the once-dominant Institutional Revolutionary Party (PRI) and the centrist Citizens’ Movement.

The lower house first backed the bill in a general vote on Tuesday night, the business outlet Expansión reported. Deputies finished the article-by-article vote on Wednesday and accepted none of more than 200 opposition amendments, El Universal reported.

How the Deduction Cap Works

The Mexico tax reform adds a new chapter for firms with yearly income above 50 million pesos (about US$2.7 million) and a taxable profit. If their deductions exceed 96.67% of that income, they can deduct only up to that line.

Companies below the line would still lose 1% of their deductions under the bill. Any deductions blocked by the cap can be carried forward and used over the next 20 years.

The government says the cap targets deductions backed by fake invoices from shell companies. In its analysis, such suppliers made up about 10% of spending at firms above the line, against about 1% at most firms below it.

For 2027, firms that deducted more than 96.67% of income in their last return must also raise their monthly advance tax payments sharply. The bill multiplies the profit ratio used to set those payments by about 2.6, against about 1.07 for other large firms.

Interest, Losses and Who Is Spared

The Mexico tax reform also cuts deductible net interest to 20% of a firm’s adjusted taxable profit, down from 30% now. The government says the new level sits inside the 10% to 30% range advised by the OECD, the Paris-based club of mostly rich economies.

Large firms covered by the new chapter could use past losses to cancel only half of a year’s taxable profit. Losses left over can be used in the following 20 years.

Export-assembly plants known as maquiladoras, which mostly build goods for the US market, are spared except on sales inside Mexico. Firms less than five years old, farm businesses and bankrupt companies are also left out.

Emilio Suárez, an opposition deputy for the PRI, called the interest and loss limits a severe blow for small and medium-sized firms. He spoke during the lower house debate on Tuesday, Expansión reported.

Corporate Groups and Small Earners

The Mexico tax reform also abolishes an optional regime that let groups of linked companies defer part of their income tax. Groups still using it must leave it on 1 January 2027.

For individuals, the reform raises the income ceiling of the simplified trust regime, a low-rate system for small earners known as RESICO. They could earn up to 5 million pesos (about US$271,000) a year and stay in it, up from 3.5 million pesos (about US$190,000).

All peso amounts here use about 18.46 pesos to the US dollar on 15 October 2026. The higher ceiling lets more self-employed people stay in the low-rate regime as their earnings grow.

What It Means for You

If you own or invest in a large firm in Mexico, check how close its deductions run to the 96.67% line. Under the Mexico tax reform, firms near that line, heavy borrowers and firms with old losses face a higher tax bill from 2027.

Export-assembly plants keep their special treatment, which limits the hit for many US manufacturers that work through them. Self-employed people and small traders in Mexico gain room to grow inside the simplified regime.

What Is Not Known

It is not yet known how much extra revenue this Mexico tax reform will bring in once companies adjust. The date of the Senate vote is not yet known, and the law is set to take effect on 1 January 2027.

Senators can still amend the bill and send it back to the lower house. The tax office, known as SAT, may also issue rules that change how companies apply the new limits.

More: Mexico news in English, every day from The Rio Times.

Frequently Asked Questions

Is the Mexico tax reform already law?

No, the Mexico tax reform has passed only the lower house of Congress. The Senate must approve it and the president must publish it before it takes effect on 1 January 2027.

Which companies does the deduction cap affect?

It covers companies with yearly income above 50 million pesos (about US$2.7 million) that report a taxable profit. Maquiladoras’ export work, firms under five years old and some other groups are left out.

How much can a large company deduct under the bill?

A firm whose deductions exceed 96.67% of its income can deduct only up to that line. A firm below it keeps 99% of its deductions, and blocked amounts can be used over 20 years.

What changes for small earners in Mexico?

Self-employed people can stay in the simplified RESICO regime with yearly income of up to 5 million pesos (about US$271,000). The current ceiling is 3.5 million pesos (about US$190,000).

Sources: Cámara de Diputados, Gaceta Parlamentaria: Dictamen de la Comisión de Hacienda y Crédito Público sobre la Ley del Impuesto sobre la Renta (Anexo IV-1), 13 October 2026; El Universal: Diputados aprueban Ley del ISR para combatir la evasión fiscal; es turnada al Senado, 14 October 2026; El Financiero: Reforma a la Ley del ISR 2027, los tres cambios aprobados por diputados, 14 October 2026; Expansión: Cámara de Diputados avala reforma a Ley de ISR que limita deducciones a las empresas, 13 October 2026.

Editorial responsibility: Matthias Camenzind, Editor-in-Chief · Editorial standards · Report an error

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