Corporate income tax (ISR) in Mexico 2026: 30% rate, provisional payments and how to calculate it

The 30% rate and the most expensive misconception in Mexican business

Saying that corporate ISR in Mexico is 30% is technically correct and practically incomplete. The rate is in article 9 of the Income Tax Law (LISR), has been flat since 2014 and has no progressive brackets. But the 30% applies to taxable profit — not to gross revenue, not to total billing, not to money deposited in the bank account.

Taxable profit is calculated as follows:

The gap between gross revenue and tax result can be enormous. A consulting firm with $6,000,000 MXN in revenue and $3,800,000 in authorized deductions (salaries, rent, services, equipment depreciation) has a taxable profit of $2,200,000 MXN. Its annual ISR would be $660,000 — not $1,800,000. That $1,140,000 MXN difference is real and depends on whether expenses are correctly deducted, with proper CFDIs and within the requirements of article 31 LISR.

Accruable income: what counts and what does not

Article 17 LISR establishes that income is accruable when the CFDI is issued, the payment is received or the good or service is delivered — whichever comes first. This has an important practical implication: if you issue an invoice in December but the client pays in January, the income is already accruable in December. Not in January when the money arrives.

The inflation annual adjustment (Arts. 44–46 LISR) is one of the concepts that most confuses company directors reviewing their financial statements: it is not a cash inflow, but it can generate accruable income that increases the ISR base. At the same time, if the average balance of debts exceeds that of receivables, it generates an inflation deduction. In companies with significant liabilities (bank loans, suppliers), this adjustment is usually a deduction — something many accountants actively manage.

Authorized deductions: the articles that determine how much is paid

Article 25 LISR lists the authorized deductions for legal entities. The most relevant for most businesses:

Article 27 LISR sets the requirements each deduction must meet. The most ignored — and the one that generates the most rejections in audits — is section III: expenses paid in cash of more than $2,000 MXN must be paid by check, wire transfer or card. A cash payment above $2,000 MXN is simply not deductible, regardless of whether everything else is correct.

Provisional payments: the monthly mechanics that define cash flow

Legal entities do not only pay ISR in March (annual return) — they make provisional payments every month, by the 17th of the following month. The mechanism is in article 14 LISR:

Step 1 — Calculate the utility coefficient (CU):
CU = Prior year taxable profit / Prior year nominal income

Step 2 — Apply CU to cumulative nominal income for the period:
Estimated taxable profit = Cumulative nominal income January–current month × CU

Step 3 — Calculate ISR for the period:
Cumulative ISR = Estimated taxable profit × 30%

Step 4 — Subtract prior provisional payments:
Monthly provisional payment = Cumulative ISR − Prior provisional payments − ISR withholdings

Tax losses: the ten years most companies do not fully use

When a company ends the year with authorized deductions exceeding accruable income — a tax loss — that loss does not disappear. Article 57 LISR allows carrying it forward against taxable profits for the next ten fiscal years.

The condition that makes the difference between a useful carryforward and one that is lost: inflation adjustment. The tax loss is updated by multiplying it by the ratio of the INPC (National Consumer Price Index) for the last month of the year in which it is applied to the INPC of the last month of the year in which the loss occurred. In periods of high inflation — and Mexico has had double-digit inflation for several years — this can significantly increase the real value of the loss available to offset.

The company does not just recover $800,000 — it recovers $871,600 in inflation-adjusted terms. The $71,600 difference is the inflationary effect the legislature built in to prevent the loss from losing real value. It is a mechanism that exists but that many business owners do not monitor systematically.

CUFIN, dividends and the ISR that arrives when least expected

When the shareholders of an SA de CV want to withdraw profits as dividends, there is a tax mechanism that determines whether those dividends trigger additional ISR or not: the Net Tax Profit Account (CUFIN).

The CUFIN accumulates the net taxable profits from each fiscal year — meaning taxable profit after corporate ISR paid, adjusted for inflation. Dividends paid from CUFIN are free from additional ISR: the tax was already paid at the corporate level.

The problem arises when shareholders distribute more than what is in the CUFIN. In that case, the excess triggers an additional 10% ISR on the dividend distributed, calculated on a grossed-up base and paid by the legal entity (Art. 10 LISR):

The distribution outside CUFIN triggers the article 10 "gross-up": the distributed dividend is divided by 0.70 to obtain the corporate ISR base, and 30% is applied to that increased base. It is the costliest mechanism in the fiscal structure of a legal entity and the one that most surprises shareholders when the bill arrives.

Real case: tech services company with three shareholders

An SA de CV in Monterrey providing software development services, with three shareholders at 33.3% each, closed 2025 with these figures:

The 2023 loss reduced ISR by $123,000 MXN ($410,000 × 30%). Without that amortization, the balance due in the annual return would have been $65,000 + $123,000 = $188,000 MXN. The difference is real and depends on having the loss register correctly maintained and updated.

When shareholders wanted to distribute $1,500,000 MXN in dividends in 2026, we checked the CUFIN balance. Available balance: $1,320,000 MXN. The first $1,320,000 carried no additional ISR. The remaining $180,000 triggered the article 10 mechanism, generating $180,000 × 1.4286 × 30% = $77,143 MXN in additional corporate ISR — a cost that could have been entirely deferred by leaving that $180,000 in the company for one more year for it to enter the CUFIN.

Key compliance deadlines

Beyond the correct calculation of ISR, legal entities have formal obligations whose non-compliance generates direct SAT fines — often more expensive than the tax itself:

• Monthly provisional payments: due by the 17th of each month. One day late activates 1.47% monthly surcharges plus inflation adjustment.
• DIOT not filed: the Informational Return of Transactions with Third Parties must be filed monthly by entities that cause VAT. The fine for omission ranges from $13,370 to $133,750 MXN per return (Art. 82-I CFF, 2026 amounts).
• Annual return filed late: March 31 is the legal entities' deadline — not April 30. Our guide on the annual return for corporations in Mexico 2026 has the full calendar with penalty amounts per day of delay.
• Electronic accounting not submitted: companies with annual income above $4,000,000 MXN must submit their monthly trial balance to SAT through the electronic accounting portal. Omission generates fines of $8,040 to $68,840 MXN.

For foreigners thinking about setting up a Mexican legal entity, our guide on how to open a company in Mexico as a foreigner covers the incorporation process and what fiscal obligations are triggered from day one.