On January 22, the Federal Executive published a Decree in the Official Gazette of the Federation granting tax incentives to legal entities and individuals engaged in business activities.
One of the main objectives of the Decree is to maximize Mexico’s competitive advantages to develop local/regional supply chains, strengthen training and technological innovation, and enhance direct marketing channels. To achieve this, it is deemed necessary to encourage the relocation of foreign companies to national territory (nearshoring) and support domestic companies. Therefore, the tax benefits under the Decree are granted without distinction of industrial sector or nationality.
The tax incentives consist of (i) the immediate deduction of investments in new fixed assets acquired between January 22, 2025, and September 30, 2030 (applying the percentages established in the Decree); and (ii) an additional deduction equivalent to 25% of the increase in expenses incurred for employee training.
Additionally, a mechanism is established to recognize the immediate deduction of investments in provisional income tax payments, benefiting the cash flow of taxpayers who apply the tax incentives provided in the Decree.
As a control measure, the Decree establishes an Evaluation Committee composed of officials from the Ministry of Finance and the Ministry of Economy. The application of the incentives and benefits provided in the Decree is subject to the prior issuance of a compliance certificate by the Evaluation Committee. General Rules will detail the composition of the Evaluation Committee and the requirements to obtain the compliance certificate.
Taxpayers in the scope of the Decree include all legal entities and individuals with a Mexican Tax identification number, that are up to date with their compliance obligations and obtain authorization from an Evaluation Committee (i.e., a new government body established to ensure transparency and control of the incentives).
The total authorized tax incentives for the duration of the Decree will not exceed 30b Mexican pesos (approximately, US$1.5b), with 28.5b Mexican pesos (approximately, US$1.425b) for the accelerated depreciation incentive, and 1.5b Mexican pesos (approximately, US$750m) for the additional deductions for training and innovation expenses. Out of the total 30b Mexican pesos amount, 1b Mexican pesos will be reserved for taxpayers with a maximum income of 100m pesos (approximately, US$5m) in the previous year.
Highlights of the incentives included in the new Decree follow
Accelerated tax depreciation for investment in new assets
The incentive allows for the immediate tax deduction of investments in qualified new fixed assets acquired from 22 January 2025 through 30 September 2030. The fixed assets must be used for the performance of productive economic activities, for a period of at least two years following the year in which the accelerated depreciation deduction is applied.
Consistent with Mexico’s past policy for accelerated depreciation, the decree provides a table of percentages to be applied to the cost of the asset to determine the amount of the immediate deduction. The percentage to be applied ranges from 35%-91%, depending on the nature of the asset and is applied to the acquisition cost to determine the single-year deduction. The remaining cost is nondeductible, unless the asset is sold or written off prior to the end of a specified period. A table is included in the decree to provide details of the amount that can be recovered through an additional deduction in these cases, based on the elapsed time.
This benefit does not apply to office furniture and equipment, automobiles, armoury for vehicles and other non-individually identifiable assets. The benefit is applicable to a wide range of assets, including construction equipment, railroads, ships, airplanes, electric vehicles, computer equipment, communication systems and certain other industrial machinery.
The immediate deduction established in the decree is considered a fully deductible expense for Value Added Tax (VAT) purposes.
Additional deduction for training and innovation expenses
An additional deduction may be applied for income tax purposes on annual tax returns for fiscal years 2025–2030; the deduction amounts to 25% of the increase in training or innovation expenses within the fiscal year. The increase is calculated as the positive difference between the expense for training or innovation, and the average expense for these concepts in the last three fiscal years.
“Training” refers to technical or scientific knowledge related to the taxpayer’s activity, and “innovation expenses” are those related to investment projects for innovation developments that result in patents, as well as initial certifications for integration into local or regional supply chains.
Taxpayers who miss the opportunity to apply this incentive in the fiscal year in which the training or innovation expenses are incurred forfeit its application in subsequent years.
Compliance and Monitoring
Taxpayers must ensure that they strictly comply with the eligibility criteria and documentation requirements to benefit from these incentives. For example, they must keep specific records of the investments for which they chose the immediate deduction and maintain supporting documentation.
Tax authorities will conduct regular audits and monitoring to ensure the proper utilization of the incentives. Circumstances under which the Decree may be automatically nullified include: engaging in sham transactions; abusing the use of net operating losses; having an outstanding tax assessment; entering into a liquidation process; and applying a suspended digital stamp to an invoice.
Noncompliance or misuse of the incentives may result in penalties, including the repayment of benefits received.
The Mexican Tax Authority and the Evaluation Committee are expected to issue additional regulations.
Implications
Multinational entities that have subsidiaries in Mexico or are interested in investing in Mexico will want to become familiar with the new tax incentives it offers and evaluate the extent to which they may apply, which could reduce their operational costs in Mexico.
Symbiosis focuses its efforts in terms of export promotion, assistance with direct investment, and internationalization of Canadian companies. With deep cultural and business ties with the region and an understanding of the challenges presented to Canadian clients doing business in Mexico. Our team is positioned to timely and efficiently assist clients in providing counsel and the legal tools to assist in their positioning in Mexico. For further information, please contact us or book a call/video conference with a member of our team, it would be our pleasure to meet you and talk about your project.
