What the tax system covers

Mexican residents generally owe income tax on worldwide income. A home and centre of vital interests are critical; a low day count or foreign payment account does not settle residence or source. Foreign-company attribution can accelerate tax before distributions.

References [12][7][3]

When you become tax resident

Article 1 of the Income Tax Law subjects Mexican residents to tax on income regardless of the location of its source. The residence analysis therefore comes before a comparison of foreign company rates. Under Federal Tax Code article 9, an individual’s home matters. Where there is also a home abroad, the centre-of-vital-interests analysis includes Mexican-source income and the main centre of professional activities. It is unsafe to assume that staying fewer than 183 days settles Mexican residence.

References [12][7][3]

Rates and the tax base

1.92%–35% progressive ISR. The ordinary 2026 annual tariff starts at 1.92% and reaches 35% on taxable income above MXN5,107,703.92. The fixed charge for each band, permitted deductions and credits affect the calculation. Special business regimes and separately taxed investment receipts do not automatically use this scale.

References [4]

Private investment gains and business trading

Private investment gains are taxable. Qualifying exchange-traded share disposals can fall under a 10% final tax on gains, including specified foreign shares listed through the international quotation system. The market, acquisition and controlling-shareholder conditions matter; unlisted shares, property, other instruments and business trading need separate computation.

References [5][6]

Asset cost basis on arrival

Mexico’s ordinary disposal rules start from acquisition-cost calculations, with asset-specific adjustments. Moving there does not by itself establish a market-value reset. A qualifying Canada-to-Mexico move can instead permit a treaty election using fair market value where the departure deemed disposal was taxed.

Residence timing and asset cost are separate questions. Article 174’s transition paragraph concerns individual taxpayers under Title V who become Mexican residents during the year: prior Title V tax paid is final, and income received or becoming due from residence acquisition is calculated under Title IV. It neither defines residence nor revalues existing assets.

  • The ordinary-cost conclusion is an interpretation of the cited acquisition-cost rules, not an express statutory declaration covering every incoming asset or treaty.
  • Canada–Mexico Article 13(8) requires an individual to cease residence in one contracting state and immediately become resident in the other, with a deemed disposal taxed by the departure state. The fair-market-value election must be established for the relevant property; a Canadian passport alone is insufficient.
  • Indexation, broker commissions, capital repayments, inheritance and gift rules can change the deductible amount. A statement balance on arrival does not replace the acquisition history.
  • Foreign funds, trusts, transparent entities, cryptoassets and business inventory require separate classification. This record does not apply one share formula to all investments.
  • The Mexican filing procedure and deadline for the treaty election, treatment of deferred departure-tax payments, and all other bilateral treaties remain to be confirmed before implementation.
  • Treaty benefits remain subject to eligibility and the applicable MLI principal-purpose test; this conditional election is not an assurance that every Canada-to-Mexico arrangement qualifies.
Asset or situationStarting value and treatment
Purchased assets under the general disposal rulesArticle 123 starts from consideration actually paid. Check Article 124 adjustments and any applicable treaty; arrival market value is not an ordinary replacement stated in these provisions.
Qualifying exchange-traded sharesArticle 129 uses average acquisition cost including acquisition commissions, updated through the month before disposal; sale commissions affect proceeds. Its market, acquisition and transaction conditions must be satisfied. A foreign exchange listing alone does not establish eligibility.
Shares in a foreign company under the ordinary Article 22 calculationArticle 124 refers to Article 22. For foreign-company shares, documented acquisition cost is reduced by capital reimbursements, with Article 22(IV) updates through the disposal month. Do not substitute a private business valuation at immigration without a separate rule.
Land and buildingsSeparate land and construction. Article 124 updates land cost; construction is reduced 3% per elapsed year, subject to a 20% original-cost floor, then updated. This is a disposal-cost computation, not annual taxation or an automatic arrival uplift.
Inheritance, legacy and giftsArticle 124 generally preserves the predecessor’s cost and acquisition date. For a gift on which Mexican income tax was paid, it instead uses the valuation used for that tax and the payment date.
Qualifying Canada-to-Mexico transitionArticle 13(8) permits an election treating covered property as sold and repurchased at fair market value immediately before Mexican residence. The departure deemed disposal must have been taxed and the residence transition must meet the treaty conditions.
Foreign funds, trusts and other investmentsDetermine the legal form and applicable Mexican regime first. Articles 87–88 contain specific fund rules; they do not establish that every foreign ETF or fund receives identical treatment. No universal arrival reset is established here.
References [7][8][9][10][11][12][13][14][15]

Moving from Canada: test the treaty election

Article 13(8) is based on residence and a taxed deemed disposal, rather than nationality. It can permit fair-market-value deemed reacquisition immediately before entering the other state. Its existence is established in both the Canadian legislation and the Spanish treaty text held by Mexico’s Ministry of Foreign Affairs. The practical Mexican election submission needs separate confirmation.

Treaty eligibility also includes the MLI principal-purpose test. A treaty benefit can be denied where obtaining it was a principal purpose of an arrangement, unless granting it accords with the relevant treaty provisions’ object and purpose. That calls for an assessment of the actual facts; it does not establish that every move seeking tax relief fails the test.

ConditionWhat to establish
Individual taxpayerThe provision addresses a person moving between the contracting states.
Immediate residence transitionEstablish the end of Canadian treaty residence and beginning of Mexican treaty residence.
Taxed departure deemed disposalMatch the departure assessment to each particular property; an untaxed or excluded asset does not satisfy this condition merely because another holding was taxed.
Election and valuationConfirm the Mexican procedure, election validity and fair market value immediately before Mexican residence. Preserve the supporting file.
References [11][13][14][15]

A simple illustration of why the starting value matters

Illustration only: assume one qualifying asset originally cost MXN 500,000, was worth MXN 900,000 immediately before Mexican residence, and later sells for MXN 1,100,000. Assume no commissions, no capital repayments, no FX movement and an indexation factor of 1 solely to isolate the starting-value question. This is not a tax-return calculation.

  • The second row assumes the Canadian deemed disposal was taxed, the residence transition qualifies, and the Mexican election is valid. It is not available solely because the taxpayer moved from Canada.
  • Actual indexed cost, applicable tax rate, currency treatment, exemptions and foreign-tax relief require their own calculation. The illustration does not promise a specific tax saving.
Assumed treatmentStarting costIllustrative gain before other adjustments
Ordinary acquisition-cost calculationMXN 500,000MXN 600,000
Valid Article 13(8) election; all conditions metMXN 900,000MXN 200,000
References [8][11]

Build the file before changing residence

Use an asset-by-asset schedule. A new bank or broker may show a transfer-in value rather than the historical cost required for the tax analysis. Confirm which number its statements actually represent.

StageEvidence and decision
Before the moveCollect purchase confirmations, dates, quantities, commissions, improvements, capital returns and earlier reorganisations. For inherited or gifted assets, obtain the predecessor’s acquisition history and any relevant tax valuation.
At the residence transitionDocument the residence dates and any departure deemed disposal. Obtain a defensible valuation when a treaty route needs it; check the election procedure before relying on an uplift.
Before a saleCheck the asset’s Mexican classification, calculate cost and applicable indexation, and establish the peso/foreign-currency treatment under the relevant rules.
When reportingFor a transaction within Article 129 using a foreign financial intermediary not authorised under Mexico’s Securities Market Law, the taxpayer must calculate the gain or loss and tax, and retain monthly statements. Reconcile those statements with the tax-cost calculation.
References [9][10][12][11]

REFIPRE and undistributed foreign income

Article 176 addresses effectively controlled foreign entities whose income is subject to preferential taxation. The framework can reach undistributed income. Its low-tax comparison refers to tax below 75 percent of the corresponding Mexican tax, but the detailed calculation and exceptions matter.

Control is broader than a simple shareholding label. Voting and veto rights, rights to assets or profits, consolidated accounts and factual decision power can all be relevant. Foreign transparent entities also have distinct provisions, so a US LLC should not be assumed tax-neutral.

References [12][7][3]

The corporate rate does not describe the owner’s total burden

Article 9 sets the general corporate income-tax rate at 30% of the fiscal result. A distribution or salary then needs its own treatment, while indirect taxes, employment obligations and withholding may operate separately. The relevant comparison is the combined business-and-owner position for the actual income flows.

A foreign-tax credit or treaty claim requires its own conditions and supporting evidence. A company invoice does not change where the owner physically performs services, and a foreign bank account does not change the source or residence classification of the underlying earnings.

References [16][7]

Leaving physically may not end residence

Federal Tax Code article 9 contains specific rules for people and entities ceasing Mexican tax residence. Failing to provide the required notice or evidence of the new tax residence can preserve Mexican residence. This is different from a tax on a deemed asset sale.

The current code also addresses moves into preferential-tax regimes. Subject to its exceptions, residence can continue for the departure fiscal year and five following fiscal years. This needs destination-specific analysis, not a generic statement that Mexico has no departure issue.

References [12][7][3]

The information-exchange exception is specific

The code describes an exception involving a broad tax-information-exchange agreement and an international instrument enabling administrative assistance in notification, collection and recovery. Do not assume that any treaty, a residence permit or a general reputation for cooperation satisfies those conditions.

Evidence of actual new tax residence must also be considered. An investment visa without the required tax-residence facts may not solve the Mexican side of the move.

References [12][7][3]

Use the fifteen-day notice rule as a planning constraint

The current code describes the notice as due within the fifteen days immediately preceding the residence change. A destination visa approval several months earlier is not that notice, and updating a bank’s address does not replace it. Confirm the current SAT filing mechanics and required proof before entering that period.

Build a timeline for the new home, professional activities and qualifying new tax residence. Where the destination grants a permit with minimal presence, investigate what additional facts establish tax residence there. The evidence should support the real change and the representations in the Mexican filing.

References [12]

A low-tax move can create several years of overlap

The continued-residence rule for a move into a preferential regime covers the fiscal year of the notice and the five following fiscal years. The code describes an exception requiring both broad tax-information exchange and an international instrument allowing administrative assistance with notification, collection and recovery.

Test the specific destination and legal instruments rather than infer the answer from its general treaty count. If the rule applies, model the retained Mexican tax obligations alongside the destination’s rules. The question is continued residence and taxation, not merely whether the individual faces a one-time departure charge.

References [12]

Foreign companies and income attribution

REFIPRE can tax undistributed income of effectively controlled foreign entities; low-tax, control, active-income and transparent-entity rules require detailed assessment.

References [3]

Departure, migration and continuing obligations

Income Tax Law article 12 treats a departing resident company as liquidated with market-value asset disposals. For individuals, article 9 continuing-residence rules are a separate issue, not a general deemed-sale exit charge.

References [12][7]
Sources & research notes16 references

Sources supporting this guide. Research draft awaiting editorial review.

  1. Chamber of Deputies — Federal Tax Code, article 9, April 2026 consolidated text
  2. Mexico Income Tax Law — Chamber of Deputies current text, last amendment 1 April 2024, Articles 152, 166 and 167
  3. SAT — Income Tax Law article 176, controlled foreign entities and REFIPRE
  4. Mexico SAT — Annex 8 annual and withholding tariffs for 2026
  5. Mexico SAT — 10% final tax on qualifying individual exchange-traded share gains
  6. Mexico SAT, January 2026 — qualifying foreign securities in the international quotation system
  7. Mexico Income Tax Law — acquisition-cost rules and residence transition
  8. SAT — Article 123, acquisition cost
  9. SAT — Article 124, property adjustments, shares, inheritance and gifts
  10. SAT — Article 129, qualifying exchange-traded share gains
  11. Canada–Mexico Tax Convention 2006 — Article 13(8) residence-change election
  12. Mexico Federal Tax Code — Article 20, Mexican-peso tax and currency rules
  13. OECD — Multilateral Instrument, treaty anti-abuse and capital-gains provisions
  14. OECD depositary — Mexico definitive MLI reservations and notifications
  15. OECD depositary — Canada definitive MLI reservations and notifications
  16. SAT — Corporate rate under article 9