Mexico: Reduced income tax and VAT rates as incentives for the northern and southern border regions

Mexico: Reduced income tax and VAT rates as incentive

Four decrees issued by the Mexican executive authority on 27 November 2020 (and pending publication in the official gazette) provide tax incentives—including reduced rates of income tax and value added tax (VAT)—for Mexico’s northern and southern border regions. The measures have an effective date of 1 January 2021.


Among the tax incentives are the following:

  • A tax incentive regime is to be extended until 2024, with a reduction of the VAT rate to 8% (from 16%), a reduced rate of income tax to 20% (from 30%), and regarding the special excise tax (IEPS) on gasoline.
  • In addition to the northern border region, taxpayers in 22 municipalities in the southern border region (that is, Mexico’s border with Guatemala) will also be eligible for the tax incentives of the reduced rates of VAT and income tax as well as the tax incentives regarding IEPS imposed on gasoline.
  • To promote economic activity, an exemption from the general import tax (IGI) and an exemption from the customs processing fee (DTA)—as well as the reduced VAT rate of 8% and the reduced income tax rate of 20%—are being made available for taxpayers in Chetumal (a city located in the state of Quintana Roo on the Yucatán Península).  

For more information, contact a tax professional with the KPMG member firm in Mexico:

Antonio Zuazua | +52 81 8122-1938 |

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