Mexican VAT rates and VAT compliance

Mexico operates a value-added tax (VAT) system known locally as Impuesto al Valor Agregado (IVA). Mexican VAT is governed by the Ley del Impuesto al Valor Agregado and administered by the Servicio de Administración Tributaria (SAT), Mexico’s federal tax authority.

The standard VAT rate in Mexico is 16%. A zero rate applies to certain goods and services, and a reduced rate applies in designated border regions.

Businesses registered for VAT in Mexico must apply the correct VAT rate to taxable supplies and remit the tax to the SAT by submitting periodic VAT returns.

Some supplies are exempt from Mexican VAT. Common exemptions include:

• Certain financial and credit services
• Residential leasing of immovable property
• Some education services
• Certain passenger transport services

Exempt supplies do not generate output VAT and generally do not allow recovery of input VAT related exclusively to those activities.

A VAT registration (RFC registration) is required for businesses carrying out taxable activities in Mexico.

• Domestic businesses must register for VAT when they begin taxable activities. There is no minimum turnover threshold.
• Nonresident (foreign) businesses may be required to register for VAT if they make taxable supplies in Mexico.
• Foreign providers of digital services supplied to Mexican consumers are generally required to register and charge Mexican VAT from the first taxable supply, regardless of physical presence.

Mexico does not operate VAT simplification thresholds comparable to EU OSS/IOSS schemes; VAT obligations are determined by the nature of the supply and the location of the transaction or customer.

Get more information on VAT registration in Mexico.

VAT-registered businesses in Mexico must file monthly VAT returns.

Returns include:

• Output VAT charged on taxable supplies

• Creditable input VAT on eligible business purchases

Returns are submitted electronically via the SAT’s online systems. In addition to monthly VAT returns, businesses may also be required to comply with:

• Electronic accounting submissions
• Digital tax reporting based on CFDI data

Get more information on VAT returns in Mexico.

Foreign businesses storing goods in Mexico must consider VAT registration and compliance obligations.

• Holding inventory in Mexico for sale or distribution generally constitutes a taxable presence for VAT purposes.
• Imports of goods into Mexico are subject to VAT at the point of customs clearance, typically payable by the importer of record.
• Mexico does not operate a formal call-off stock or consignment simplification regime similar to those found in some EU countries.

VAT is generally payable on the importation of goods into Mexico at the time of customs clearance.

Registered businesses may recover import VAT as input VAT, provided the goods are used in taxable activities and proper documentation is maintained.

Mexico applies VAT to digital and electronically supplied services, including those provided by nonresident suppliers to Mexican customers.

• Digital services include streaming, SaaS, online platforms, apps, digital content, and intermediation services.
• Foreign digital service providers must register with the SAT, charge 16% VAT, and file monthly VAT returns.
• Certain digital platforms may be required to withhold and remit VAT on behalf of underlying suppliers.

VAT-registered businesses may generally recover VAT incurred on taxable business expenses by crediting input VAT against output VAT in their monthly returns.

Mexico does not operate a standalone VAT refund scheme for non-established businesses comparable to EU VAT refund procedures. Recovery of VAT is typically achieved through VAT registration and ongoing compliance.

Excess VAT credits may be:

• Carried forward to offset future VAT liabilities, or
• Refunded through a formal refund request process, subject to SAT review.

Exports of goods and certain services supplied to customers outside Mexico are generally zero-rated for VAT purposes. This allows exporters to charge 0% VAT while retaining the right to recover related input VAT, provided documentary and compliance requirements are met.

Trade in goods is monitored through customs import and export declarations filed with Mexican customs authorities and the SAT.

Mexico operates a mandatory electronic invoicing system (CFDI) for VAT purposes.

VAT-compliant invoices must:

• Be issued in XML format
• Be validated and certified (“timbrado”) by the SAT or an authorised certification provider (PAC) 
• Include seller and buyer RFCs, detailed product/service codes, VAT treatment, and amounts

Time-of-supply rules are closely linked to invoicing:

• Goods and services:  VAT is generally triggered at the time the CFDI is issued or payment is received, depending on the transaction type.
• Imports: VAT is due at customs clearance.

VAT and accounting records must generally be retained for at least five years. Monthly VAT returns and payments are generally due by the 17th day of the month following the reporting period.