On October 26, Mexican Congress approved the 2022 tax reform, which amended, added or repealed several provisions of the Mexican Income Tax Law (“MITL”), the Value Added Tax Law (“VATL”), the Excise Tax Law (“LIEPS” for its acronym in Spanish), the Federal Fiscal Code (“FFC”), among other regulations; such reform was submitted to Congress on September 8, 2021 by President López Obrador. Until today, its publication in the Official Gazette is still pending.

In general terms, congressmen approved the proposed reform, with the exception of some proposals that were controversial, such as: (i) the order for taking foreign tax credits and the tax paid in advance in Mexico; (ii) the non-inclusion of voluntary and complementary payments to retirement plans within the limitation of five times the annual value of the “UMA”, or 15% of the taxpayer’s total taxable income, and (iii) the clarification that legal age individuals with no economic activities, originally obliged by the tax reform to register before the Federal Taxpayers Registry (“RFC”, for its acronym in Spanish), will not be forced to file tax returns, pay taxes or be subject to penalties. 

The following is a summary that considers some of the key takeaways that were approved: 


  • Mexican financial system: Mexican tax authorities may issue administrative rules necessary for the due and correct application of the provision which establishes which entities are considered as part of the Mexican financial system for tax purposes. It will be important to monitor the content of such rules, particularly, for the case of Mexican SOFOMEs.

  • FX gains: FX gains may not be less than those which result from applying the exchange rate to settle obligations in foreign currency, published in the Official Gazette that corresponds to the day on which such gains are obtained. 

  • Back-to-back loans: Financing transactions, other than those already ruled in the MITL, from which interest arise for Mexican legal entities or foreign residents with a permanent establishment in Mexico, will also be treated as back-to-back loans when they lack a “business reason”. The term “business reason” was already relevant as a result of several legal precedents; however, since this term becomes even more relevant due to this tax reform, it will be crucial to carefully analyze any interest deduction derived from intercompany loans. 

  • Usufruct: Rules are added to prevent abuses resulting from the detachment of property rights, such as transferring the bare ownership (nuda propiedad) or maintaining the usufruct of a certain asset during a period of time, to avoid the generation of taxable income derived from the sale of assets and to obtain tax losses. Rules added are as follow: (i) the value of the usufruct right, determined through an appraisal and at the moment in which the unification of the bare ownership and usufruct of an asset is carried out, must be considered as taxable income; (ii) public notaries, public brokers, judges and other parties with public faith before whom the usufruct was constituted, will have a 30-day period to inform such transaction to the Mexican tax authorities, and (iii) in the sale of the usufruct or the bare ownership of an asset, the gain must be determined by subtracting, from the price obtained, the original amount of the investment in the proportion which corresponds according to the appraisal carried out.  When a given usufruct right over a real estate property is acquired, it must be considered as a fixed asset and, therefore, a 5% maximum rate for the deduction of investments will apply.

  • Corporate restructures at tax cost: The requirements to obtain the respective authorization by the tax authorities are hardened, including: (i) this benefit will only be granted to “companies that are residents in Mexico for tax purposes” and belong to the same group (previously, reference was made to “companies incorporated in Mexico”); (ii) the opinion issued by a certified public accountant must contain several additional information; (iii) all relevant transactions (as defined in the provision itself) related to the intended restructure, carried out in the 5 immediate years, must be described; (iv) if any relevant transaction is carried out within the 5 year-period after the restructure, the buyer party must submit certain information, and (v) in the event tax authorities, within the exercise of their auditing powers, notice the restructure lacks a valid “business reason”, the authorization will be void and the updated tax will be due, considering the market value of the shares. 

  • Measures against illicit hydrocarbons market: As a new deductibility requirement for the acquisition of fuel for maritime, air and land vehicles, digital tax invoices must include fuel supplier’s current permit information.

  • Expenses regarding technical assistance, technology transfers or royalty payments: Due to the “New labor reform”, payments made to residents in Mexico regarding technical assistance services, technology transfers or royalty payments rendered by third parties, will only be tax deductible if they are deemed as specialized services. 

  • Collection efforts for uncollectible credits: The reform adds requirements to consider uncollectible credits as deductible, including that for credits which principal amount is greater than 30 (thirty) thousand UDIS, the creditor must obtain a final resolution issued by the relevant authorities to demonstrate that collection efforts were exhausted or collecting such credits is virtually impossible. It is important to highlight that this change limits the possibility for taxpayers to deduct credits without exhausting the necessary collection efforts, since previously it was only necessary to file a collection lawsuit to be able to deduct uncollectible credits.

  • Thin capitalization rules: Regarding the option taxpayers have to consider as stockholders’ equity of a given tax year, the average of the sum of the beginning and ending balances of their tax attributes, some changes are included: (i) tax losses pending to be applied are considered as an element to be subtracted, and (ii) it is established as a general rule that such option will not apply when the result of the arithmetic formula exceeds 20% of the stockholders’ equity, unless it is proven that the circumstances which cause such difference have a valid “business reason”. It is clarified that the exception of not including as debts that accrue interest payable by the taxpayer, those contracted for the construction, operation or maintenance of productive infrastructure related to Mexican strategic areas or for the generation of electric energy, is only applicable to the holder of the document issued by the relevant authority, with which it is proven that it can carry them out on its own. The exception for not including within debts which accrue interest payable by the taxpayer, those held by the members of the financial system in transactions inherent to their corporate purpose, will not be applicable in the case of non-regulated SOFOMES that for achieving their corporate purpose carry out activities mainly with their domestic or foreign related parties. 

  • Deduction of technical reserves by insurance companies: It is clarified that for technical reserves created by insurance companies to be tax deductible, these have to be created in accordance with the administrative rules issued by the National Insurance and Bonding Commission.

  • Investments: The disbursements regarding the physical allocation, installation, assembly, handling, delivery and the services contracted for the investment to operate correctly, are now considered as part of the original amount of the investment. Additionally, the obligation to file a notice for the transfer of assets which are no longer useful was reincorporated, to prevent certain taxpayers from continuing giving tax effects to those assets that are no longer useful. 

  • Mining sector: Regarding investments carried out for the acquisition of mining concession titles (exploitation rights), they will not be considered as investments made within the pre-operating period, but rather must be considered as deferred expenses to which maximum deduction percentage will be the result of dividing said deferred expenses by the number of years for which the concession was granted, and not the 10% rate corresponding to disbursements made in the pre-operating period. This will result in a significant reduction in the deduction percentage that companies in said sector may apply. In case of installations, additions, repairs, improvements, adaptations, as well as any other construction carried out in a mining lot, the maximum annual rate of 5% shall be applicable in order to deduct such investments.

  • Information on cash deposits: Financial system institutions that pay interest are obliged to report to the authorities under certain assumptions, on a monthly basis, information on cash deposits made in the accounts opened by taxpayers in such institutions. Previously, it was an annual obligation.

  • Tax losses amortization: It is clarified that the correct interpretation, in case of corporate spin-offs, has always been that tax losses pending to be subtracted should be divided among the new companies which keep the same line of business as the spin-off company. Additionally, the assumptions to consider a change of partners or shareholders after a merger, for purposes of tax loss amortization derived from previous years, are broadened. In summary, the following cases are added: (i) when there is a change of direct or indirect shareholders with preferential rights which allow them to take decisions in shareholders’ meetings or in the board of directors, and (ii) the financial statements of the company are no longer consolidated. Lastly, in the event that agreements or legal acts are executed, according to which a change of partners or shareholders depends on a suspension condition, the change is considered to have taken place on the execution of said act. 

  • Agricultural, livestock, forestry or fishing activities (AGAPES) Individuals: Due to the entry of the new “good faith” simplified regime for individuals, the current AGAPES regime is modified, providing that individuals engaged exclusively in agricultural, livestock, forestry or fishing activities, whose income for the year does not exceed the amount of nine hundred thousand pesos effectively collected, will not pay income tax on the income obtained from those activities.

  • Computation of net taxable income: It is stated that the Employees’ Profit Sharing (“PTU” for its acronym in Spanish) is not a concept that must be subtracted for the computation of the net tax profit.

  • Concepts assimilated to salaries: It is specified that individuals with income assimilated to salaries for fees and business activities that obtain income greater than seventy-five million pesos, must pay taxes under the Business and Professional Activities Regime, and the tax authorities are authorized to update the economic activities and obligations of such taxpayers in the event that the tax is not paid in terms of the aforementioned regime.

  • Tax Incorporation Regime: The Tax Incorporation Regime is eliminated so that taxpayers may choose to be taxed under the new “good faith” simplified tax regime. It is important to mention that these taxpayers must apply the credits and deductions in the annual tax return for 2022, as well as request a refund of any outstanding tax credit balances.

  • “Good faith” simplified regime for individuals: Individuals who only carry out business or professional activities or grant the temporary use or enjoyment of property may choose to be taxed under this regime, provided that their total income does not exceed the amount of three million five hundred thousand pesos. The monthly payments will be determined considering the total income actually received, without including the value added tax, and without applying any deduction, applying a progressive tax rate ranging from 1% to 2.5% depending on their income. 

  • Donations personal deduction for individuals: Payments made in the form of donations are included within the limit of personal deductions (5 times the annual value of the UMA or 15% of the taxpayer’s total income). 

  • Comparable operations of residents abroad: Residents abroad who obtain income from sources of wealth located in Mexican territory will be required to determine the income and deductions derived from transactions with related parties, considering the prices, amounts of consideration or profit margins that they would have used or obtained with or between independent parties.

  • Income from acquisition of goods residents abroad: When the tax authorities perform an appraisal and the appraisal exceeds by more than 10% the agreed consideration for the sale, an obligation is included for the seller to pay the corresponding tax if he/she/it is a resident in Mexico or a resident abroad with a permanent establishment in Mexico; those who pay the tax in this case will substitute the taxpayer (resident abroad) in the obligation to pay the tax. 

  • Income from the sale of shares residents abroad: (i) An obligation is added for the public accountant to report whether the market value (agreed consideration) of the shares matches that which would have been used by independent parties and to include evidence of this (transfer pricing studies); (ii) it is detailed that the SAT, by means of administrative rules, may determine cases in which withholding does not apply; (iii) it is established that in corporate reorganizations, the shares will cease to be part of the group when the issuing company and the company acquiring the shares cease to consolidate their financial statements, and (iv) it incorporates the assumption that corporate reorganization authorizations are not only subject to the compliance with the requirements established in the MITL Regulations, but also to the requirements established in the rulings issued by the tax authorities.