VAT (IVA) Compliance and Filings

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Everything you need to know about VAT Compliance Filings

What are Corporate VAT Requirements in Mexico?

All legal entities in Mexico, including Limited Liability Companies and Corporations (Sociedad de Responsabilidad Limitada or Sociedad Anonima, respectively), must file monthly VAT taxes. The corporate VAT tax, known as Impuesto al Valor Agregado or IVA in Mexico, is filed electronically by way of the Mexican government’s tax system operated by the SAT or Servicio de Administración Tributaria.

Companies should not attempt to file VAT taxes on their own and should contract the services of an accounting firm specifically experienced in the nuances of foreign-owned companies operating in Mexico. It is not practical for non-Mexican accountants to attempt to file VAT on their own, because the Mexican tax filing system and GAAP rules differ significantly from other jurisdictions. VAT is also paid on all products imported into Mexico at the border, which is credited against sales. Most of the time this tax in Mexico even among foreigners will be referred to as IVA and not VAT.

Overview of Mexican Income Tax Obligations

Category	Details
Tax Name	Impuesto al Valor Agregado (IVA) – Value Added Tax
Taxpayer Scope	Individuals and corporations performing taxable acts in Mexico.- Non-residents providing digital services to recipients in Mexico.- Importers of goods or services.
Taxable Activities	Sale of goods in Mexico.- Provision of independent services in Mexico.- Leasing of goods in Mexico.- Importation of goods or services.- Certain digital services provided to Mexican consumers.
Standard VAT Rate	16% general rate 0% for exports and certain goods/services (basic food, medicines, agricultural products, some international transport).
Who Must Register	Any person or entity performing taxable acts in Mexico must register for an RFC with the SAT. Non-resident digital service providers must register and collect VAT.
Filing Frequency	Monthly VAT returns due by the 17th day of the following month.
VAT Calculation	VAT Payable = Output VAT (charged on sales) − Input VAT (paid on purchases and expenses).If Input VAT > Output VAT → Credit or refund.
Invoice Requirements	Must issue CFDI electronic invoices for all taxable transactions to claim VAT credits.
Refunds	Possible if Input VAT exceeds Output VAT (common in export operations). Subject to SAT review.
Record Keeping	Maintain CFDIs and proof of payment through authorized methods for at least 5 years.
Penalties for Non-Compliance	Late filing: fines ranging from approx. MXN $1,400 – $34,000 per month.- Suspension of Digital Seal Certificate (CSD) preventing invoicing.- Interest charges (recargos) on unpaid balances.
Legal Basis	Ley del Impuesto al Valor Agregado (LIVA) – Latest reform in force.

What does VAT as known as IVA in Mexico Involve?

You will need to incorporate a legal entity in most cases. Payment of corporate tax obligations is not possible as a foreign company without an RFC ID, which is the Mexican Tax Identification number. Obtaining an RFC ID in Mexico requires the incorporation of a corporate entity such as a Sociedad de Responsabilidad Limitada or Sociedad Anomima. Tax branches in Mexico are subject to the same requirements, obligations and establishment requirements as traditional corporations and are neither recommended nor practical.

Also notice, that import VAT paid at the border is going to be deducted in the examples below. This is particularly important for anyone selling goods in Mexico that are imported – for instance for sale on e-commerce platforms and distributed within Mexico.

Example of how income tax works for basic domestic operations:
Step	Description	Real-Life Example Calculation (Import Scenario)
1. Charge Output VAT on Sales	When selling taxable goods or services in Mexico, add VAT at the applicable rate to the sale price.	Sale of imported electronics: $200,000 MXNOutput VAT = $200,000 × 16% = $32,000 MXN
2. Pay Import VAT	When importing goods into Mexico, VAT is paid at customs based on the customs value of the goods. This VAT is treated as Input VAT if the goods are for resale or business use.	Customs value of goods: $120,000 MXNImport VAT = $120,000 × 16% = $19,200 MXN (paid at import)
3. Record Other Input VAT	Include VAT paid on other domestic purchases related to the business.	Purchase of office equipment: $20,000 MXNInput VAT = $20,000 × 16% = $3,200 MXN
4. Calculate Total Input VAT	Sum the VAT credits from imports and other purchases.	Import VAT $19,200 + Domestic Input VAT $3,200 = $22,400 MXN
5. Calculate VAT Payable	Output VAT − Total Input VAT.	$32,000 − $22,400 = $9,600 MXNpayable
6. Refund/Credit Situation	If Input VAT > Output VAT, you can carry forward the credit or request a refund from SAT.	Not applicable in this case (payable balance).
7. File and Pay Monthly	VAT return must be filed and paid by the 17th of the following month.	January VAT = $9,600 → Pay by February 17
8. Maintain Documentation	Keep CFDIs, import pedimento documents, and proof of payment for all purchases and imports.	Keep CFDIs, import pedimento documents, and proof of payment for all purchases and imports.

Do I need to pay VAT taxes in Mexico?

If your company undertakes continuous and systematic business in Mexico, your operations are subject to Mexican VAT. Foreigner companies must pay taxes in Mexico in the following common situations.

Here is a decision making flowchart to help you decide if you are subject to Mexican VAT and income taxes and should register an RFC ID.

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If you already have a Mexican Company, and need to file Income Tax and VAT in Mexico.

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If you already have a Mexican Company, and need to file Income Tax and VAT in Mexico.

If you don’t have a Mexican Company yet, and need to file Income Tax and VAT in Mexico.

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