Tax Optimization for Expatriates in Mexico

Mexico's tax reforms enacted in 2014 included the introduction of the so-called "tax incorporation regime" into the Income Tax Law.

The tax incorporation regime allows individuals that provide non-professional services to apply 100% income tax exemption during their first year of registration in Mexico's tax system.

In subsequent fiscal years, this exemption is reduced by 10% per year until it reaches zero in year ten.

After this 10-year period, the taxpayer will be required to pay income tax under a general taxation regime for individuals on all of his/her taxable income (Mexico’s current personal income tax rate is 35%).

Expatriates who are currently registered in the Federal Taxpayer Registry of the Tax Administration Service under the salaried individuals’ regime may also register under the tax incorporation regime and apply the tax exemption on the income they earn from providing non-professional services in Mexico.

Expatriates who are interested in seeking their registration or change into the tax incorporation regime need to verify their compliance with the relevant legal requirements for doing so.