VAT in Mexico

Our specialists in company formation in Mexico can offer tailored assistance to investors who need to complete their tax registration in this country. Among our tax services we also include registration for VAT in Mexico, one of the main taxes charged to local businesses.

What is VAT?

The VAT in Mexico (locally known as IVA – in Spanish, Impuesto al Valor Agregado) is payable at a general rate of 16% on the sales of products and services. The VAT also applies to lease payments and imports of products and services.

What is the structure of the VAT number?

The VAT number is comprised of the following:

• 3 letters – from the company’s trade name;
• 6 digits – the company’s date of incorporation;
• an alphanumeric code (3 elements) – it represents a generated code issued by the tax authority.

Where do I need to register for VAT?

All companies that have VAT obligations in Mexico need to complete the required formalities with the Tax Administration Service.

When should a company start the formalities for VAT registration?

Provided that a business is liable to the payment of the VAT, the registration must be made as a mandatory step during the process of company formation in Mexico, prior to starting any business activity, therefore, prior to any sales.

When is a Mexican company liable to VAT?

The formalities to register for VAT in Mexico for a company that has been incorporated in this country apply in almost all scenarios. Investors who have set up a company in Mexico must register as per the rules of the Mexican Value Added Tax Law. The obligation to register is applicable in the following basic situations:

1. sale of goods;
2. provision of services;
3. providing the right to use on a temporary basis various services or goods;
4. the import of services or goods.

What are the VAT obligations for foreign companies in Mexico?

In the list below, businessmen can discover some of the main aspects they should know in connection to VAT in Mexico:

1. local and foreign entities that develop commercial operations are generally required to register for VAT;
2. the obligation to register for VAT purposes in Mexico is imposed to all companies that sell goods and products or supply services to Mexican clients;
3. with regards to foreign companies, the obligation applies solely to those that operate in Mexico through a permanent establishment (such as branches);
4. the tax legislation in Mexico was amended with effect from 1 June 2020 regarding the provision of digital services by foreign tax residents, which now stipulates that a foreign company is legally required to apply for a VAT number in Mexico if it sells digital products to locals;
5. when doing so, it will also be necessary to appoint a local tax representative.

Are there any exemptions from VAT in Mexico in 2026?

In Mexico, there are numerous goods and services which are exempt from VAT, such as:

1. the sales of houses, except for the ones which are used for commercial purposes;
2. the retail sales of books, newspapers and magazines;
3. currencies;
4. financial instruments;
5. gold, jewellery and ingots with at least 80% gold content, when not sold at retail to the general public;
6. other goods and services – our Mexico company registration advisors can offer more details on these.

Who can be appointed as a tax representative?

Foreign companies that have to complete their VAT registration obligations must appoint a local tax representative, who can be any of the following:

1. licensed individual;
2. licensed legal entity.

We invite you to read the following infographic, which presents the basic information on the Mexican value added tax in 2026:

What is the VAT registration threshold in Mexico?

Mexico does not have a statutory minimum VAT registration threshold.

How long does it take to register for VAT in Mexico in 2026?

It depends on the workload of the local authorities and on whether the applicant has prepared the necessary paperwork (incomplete/unclear files can lead to a delay in the registration), but also on the nature of the applicant. For instance, for foreign, non-resident companies, the procedure can take around 3 to 8 weeks.

Are there any tax measures that have been introduced in 2026?

As of January 1st, 2026, the Mexican government introduced new tax measures, some of which refer to the manner in which VAT is charged in certain situations. Some of the most important rules available in 2026 are:

• individual sellers that sell products on marketplace platforms will be charged with an income tax rate of 2.5% (increased from 1%);
• platforms need to withhold VAT from both individual sellers and companies that sell on such platforms (before 1st of January 2026, the obligation was imposed only to individual sellers);
• digital platforms in Mexico have to withhold 100% of the VAT from sales located in Mexico completed by foreign sellers.

What are the VAT reporting rules?

Companies liable to the payment of the VAT in Mexico must know the following:

• the VAT reporting has to be done on a monthly basis, so in a year, there must be 12 VAT reports completed and submitted with the tax authorities;
• the VAT returns have to be submitted no later than the 17th day of the next month.

Are there any penalties for not registering for VAT in due time?

The Mexican Fiscal Code imposes fees and penalties for not registering for VAT in Mexico or for not registering in due time – from MXN 5,070 to MXN 15,200 (2026 amounts).

We also invite you to watch a short video on VAT registration in Mexico:

Do I need to keep the company’s accounting records?

Yes, businesses have the legal obligation to maintain and store the company’s accounting records for a period of 5 years.

For more details about the sales tax rate in Mexico, or for assistance in setting up a company in Mexico, please contact our friendly staff.