Understanding Mexico VAT (IVA) and Excise Tax (IEPS)
Overview of Mexico VAT (IVA) and Excise Tax (IEPS).Updated 3 months ago
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If your business sells goods or services in Mexico, you are likely subject to Mexico's value-added tax system. This article walks you through how the tax works, what rates apply, and what you need to know to stay compliant.
What Is Mexico's VAT?
Mexico's value-added tax is officially called the Impuesto al Valor Agregado (IVA). It applies to the sale of goods, the rendering of independent services, the leasing of goods, and the importation of goods or services into Mexico.
VAT rates are set at the federal level by the Ministry of Public Finance and Credit. There are no state-level rate variations, though niche local rates exist for hotels in certain areas.
VAT Rate Breakdown
Rate | Type | What It Applies To |
|---|---|---|
16% | Standard Rate | Most sales of goods and services throughout Mexico |
8% | Reduced Rate | Sales made in municipalities within approximately 25 km of Mexico's northern or southern borders, provided specific eligibility requirements are met |
0% | Zero Rate | Exports, unprocessed food and medicines, books and periodicals, certain agricultural supplies, domestic water, and some international transport services |
To qualify for the 8% border rate, a business must be registered in the Federal Taxpayers Registry (RFC), have a tax domicile in the border region, demonstrate real economic operations in that area, and not appear on any non-compliant taxpayer lists.
What Is Mexico's Excise Tax?
In addition to VAT, certain products are subject to a separate excise tax called the Impuesto Especial a Productos y Servicios (IEPS). IEPS is charged on top of VAT and applies to specific goods and services.
IEPS Rate Breakdown
Product Category | Rate | Notes |
|---|---|---|
Motor Fuels | Fixed peso quota per liter | Quotas are updated at the start of each year |
Alcoholic Beverages | 26.5% (beer and wine under 14°); 26.5–53% (wine 14°–20°); 53% (distilled spirits) | Ad valorem rates |
Tobacco | 160% ad valorem plus a per-cigarette peso quota | |
Sweetened Drinks and Junk Food | MXN 1.64 per liter of sugary beverages; 8% on high-calorie snacks such as chocolates and chips | |
Telecom Services, Betting, and Raffles | 3% on telecom; 30% on betting and raffles | Applied to the service price |
How to File in Mexico
Mexico requires electronic filing only. You will need both a taxpayer number (RFC) and an active SAT account before you can file.
Filing Without IEPS
Enter your Taxable Sales.
Enter the Tax Collected.
Subtract any applicable Input Tax Credits (ITCs).
The result is your final tax due (determinación).
Filing With IEPS
Calculate your VAT Base by adding your taxable sales plus the IEPS owed on those sales.
Enter the VAT Collected.
Subtract any applicable ITCs.
Complete the VAT wizard. The IEPS wizard will open next.
Enter the IEPS Payable. Both amounts will appear as separate line items in the final determination.
All filing prompts are available in the filing wizard and are designed to guide you through each step.
Filing Deadline
Returns are filed and paid monthly, due by the 17th day of the month following the reporting period. Additionally, an informational return must be filed by the end of Q1 each year following your registration.
Need Help?
If you have questions about your Mexico VAT obligations or need assistance getting set up in Kintsugi, our team is here to help. You can also explore related articles on nexus, registration requirements, and filing in Mexico.
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