Mexico Small Business Taxes 2026: IVA, RESICO and the RFC
If you run a small business in Mexico — a freelancer, a landlord with a couple of units, a tiny services company — three things shape your tax life: the VAT (IVA), the simplified RESICO regime that can cut your income tax to as little as 1%, and the RFC tax ID that makes everything official. Here is the 2026 picture.
IVA: 16% almost everywhere, 8% at the border
Mexico's value-added tax (Impuesto al Valor Agregado) applies at a general rate of 16% on the sale of goods, independent services, leases and imports. Some items are 0%-rated (most unprocessed food, medicines, books, water for domestic use) or exempt (notably education, medical services, and residential rent).
The border-region 8%: in the northern (and a defined southern) border zone, qualifying businesses effectively pay 8% IVA — not through a separate rate in the VAT law, but through a 50% tax stimulus credit (estímulo fiscal). Legal basis: the border-region stimulus decree (Diario Oficial 31 December 2018, amended 30 December 2020), extended through 31 December 2026. To use it you must:
- Have your establishment inside the covered border municipalities;
- File the SAT notice (aviso) and be listed in the beneficiary registry, then wait the required period before invoicing at 8%;
- Invoice using the 0.080000 rate key.
Excluded from the stimulus: real estate, intangibles, digital content and imports, among others. If you are outside the zone or do not register, you charge the full 16%.
RESICO for individuals: 1%–2.5% on gross income
The Régimen Simplificado de Confianza (RESICO, Article 113-E of the Income Tax Law) is the headline deal for small operators. Individuals with annual income up to $3,500,000 MXN (prior-year income) from business, professional or rental activity pay ISR on income actually collected — no deductions to track — at these 2026 monthly rates:
| Monthly income collected (MXN) | ISR rate |
|---|---|
| Up to $25,000.00 | 1.00% |
| Up to $50,000.00 | 1.10% |
| Up to $83,333.33 | 1.50% |
| Up to $208,333.33 | 2.00% |
| Up to $3,500,000.00 (annual cap) | 2.50% |
(Annual brackets: $300,000 → 1%; $600,000 → 1.10%; $1,000,000 → 1.50%; $2,500,000 → 2%; $3,500,000 → 2.50%.)
Monthly payments are final — no annual ISR return is needed. IVA is handled separately (16% or border 8%, with credit for IVA paid on business expenses). Watch the exclusions: you cannot use RESICO as an individual if you are a partner or shareholder of a company (or a related party under Article 90), a non-resident with a Mexican permanent establishment, earning income under a preferential tax regime, or earning certain board/management fees (Article 94, fractions III–VI — consejeros, administradores, comisarios and similar).
RESICO for companies: simpler, still 30%
Companies can also use RESICO (Articles 206–215), with a higher ceiling: annual income up to $35,000,000 MXN, all shareholders must be individuals, and the company must be resident in Mexico. The deal is administrative, not a rate cut:
- Tax is computed on cash-flow profit (income actually collected minus deductions actually paid) — no prior-year profit coefficient;
- The rate is the standard 30% (Article 9), applied to that cash-flow result;
- Monthly provisional payments by the 17th (Article 211).
Do not confuse this with the individuals' 1%–2.5% table — that table belongs to RESICO for personas físicas only. Some third-party sites mix them up; the SAT's own interpretive criterion (18/ISR/N) confirms the 30% cash-flow treatment for companies.
The RFC: your tax ID
The Registro Federal de Contribuyentes (RFC) is mandatory (Article 27 of the Federal Fiscal Code) for anyone who must file periodic returns or issue electronic invoices (CFDI) — all companies, their partners and shareholders, and in practice everyone aged 18 or older (you may register "sin actividad económica," with no filing obligations until you start earning). Registration is completely free, for individuals and companies alike. You will need it to invoice clients, open business bank accounts, and operate on any Mexican payroll.
IVA compliance: filing and the DIOT
IVA is filed monthly, on the same 17th-of-the-following-month rhythm as ISR provisional payments. You charge IVA to customers, subtract (accredit) the IVA you paid on business inputs, and pay the difference. If your creditable IVA exceeds what you collected — common for exporters and businesses in a heavy-investment phase — the balance can be carried forward or, in qualifying cases, refunded.
One return surprises newcomers: the DIOT (Declaración Informativa de Operaciones con Terceros), a monthly informative return listing VAT transactions with suppliers. It carries no payment, but missing it draws fines. Your accountant (contador) will normally handle both the monthly IVA return and the DIOT.
Which regime should a small operator choose?
| Situation | Likely best fit |
|---|---|
| Freelancer / professional, income ≤ $3.5M MXN/yr, few deductible expenses | RESICO individual (1%–2.5%, no deductions to track) |
| Landlord with rental income ≤ $3.5M MXN/yr | RESICO individual |
| Small company, income ≤ $35M MXN/yr, all-individual shareholders | RESICO company (30% but much simpler accounting) |
| Income above the caps, or excluded (e.g., company shareholder) | General regime (régimen general / actividad empresarial) |
| Employee only | Withholding via payroll; no regime choice needed |
Next steps
- Get your RFC if you do not have one — it is free and takes one appointment or online session; you cannot invoice without it.
- Model both regimes: compare RESICO's 1%–2.5% on gross income against the general regime's progressive rates on net income. If you have heavy deductible expenses, the general regime can win despite the higher headline rates.
- Border businesses: if you operate in the northern border zone, file the SAT stimulus notice early — the 8% IVA requires registry listing before you can invoice at the reduced rate, and the decree currently runs through 31 December 2026.
- Mind the 17th: whichever regime you choose, monthly payments are due by the 17th of the following month. Late payment triggers surcharges (recargos) and fines.