Quick summary: IVA vs ISR
| Feature | IVA (VAT) | ISR (Income Tax) |
|---|---|---|
| Full name | Impuesto al Valor Agregado | Impuesto Sobre la Renta |
| What does it tax? | Consumption (purchases and services) | Income or profit |
| General rate | 16% | 1% – 35% depending on regime and income |
| Who pays it? | The final consumer | The income earner |
| Who remits to SAT? | The seller/provider | The taxpayer |
| Frequency | Monthly | Monthly + Annual |
What is IVA (Value Added Tax)?
IVA is a consumption tax. It applies to the sale of goods and provision of services in Mexico. The general rate is 16%. In the northern border zone (20km strip) the rate is 8%.
How IVA works
- When you sell or provide services, you charge IVA to your client (IVA trasladado).
- When you buy inputs or pay suppliers, you pay IVA (IVA acreditable).
- Each month you declare to SAT the difference: IVA charged − IVA paid.
Practical example:
- You sold services for $100,000 MXN + IVA = you receive $116,000
- You paid suppliers $30,000 + IVA = you paid $34,800
- IVA to remit to SAT: $16,000 − $4,800 = $11,200 MXN
IVA-exempt activities
- Unprocessed foods (fruits, vegetables, meat, milk)
- Medicines
- Books, newspapers and magazines
- Exports (0% rate)
- Educational services
- Medical fees
What is ISR (Income Tax)?
ISR is a direct tax on income or profit. It is equivalent to Income Tax in English-speaking countries. All individuals and corporations earning income in Mexico pay ISR, regardless of nationality.
ISR rates by regime 2026
| Regime | ISR Rate | Calculation basis |
|---|---|---|
| RESICO (Individuals) | 1% – 2.5% | Gross income |
| PFAE / General Regime | Up to 35% | Taxable profit |
| Corporations (General) | 30% flat | Taxable profit |
| RESICO Corporations | 1% – 30% | Gross income |
Do I pay both IVA and ISR?
Yes, in most cases both taxes coexist:
- IVA is charged to the client and remitted to SAT — it doesn't directly come out of your pocket.
- ISR comes from your own earnings — it's a percentage of what you make.
Common mistakes to avoid
- Treating IVA charged as personal income — IVA is never yours, it belongs to SAT.
- Not keeping CFDI receipts from purchases to credit IVA.
- Not filing declarations when there was no activity (zero declarations are still required).
Leave your declarations to professionals
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