Tax Losses in Mexico: Issues to Take Into Consideration

Thomson Reuters/WorldTrade Executive

As in most countries, tax losses are an important topic that foreign investors should take into consideration when doing business in Mexico, not only because tax losses could reduce the tax burden of future profits generated by Mexican entities, thus creating a tax asset, but also because the losses could have an important impact to the financial and tax results of the foreign investors. Structuring investments in Mexico and preparing business models and budgets should include an analysis of tax losses, because otherwise important benefits could be lost. The scope of this article is to provide a general overview of the treatment of tax losses in Mexico and to discuss some of the more relevant issues to take into consideration. Although the treatment of tax losses of individuals is similar to the treatment applicable to entities, this article will focus on the rules that apply to the latter.


Taxpayers are entitled to carry forward their tax losses up to ten years after the loss occurred. The tax loss carry forward reduces the tax liability of taxpayers by reducing the taxable income in those years in which profits are generated. One of the most important rules that characterize the Mexican tax losses system is that when a taxpayer fails to apply a tax loss, when the taxpayer was entitled to do so, the right to deduct such amount in subsequent years is forfeited. Provided certain rules are applied, tax losses can be restated for inflation and are not subject to be transferred (not even through a merger). Tax losses can be carried forward not only against the yearly income tax return but also against the monthly income tax returns. It is important to mention that taxpayers are not allowed to carry forward their tax losses against the Mexican flat-tax. The Mexican flat-tax was not designed to create tax losses; instead, taxpayers could generate a tax credit when their deductions exceed their taxable income for flat-tax purposes. The aforementioned tax credit could be carried forward for ten years against flat-tax and against income tax.

In the case of a merger, the tax losses of the entity that disappears will be lost. On the other hand, the surviving entity will only be able to carry forward its tax losses to profits generated in business activities that the entity carried out when the tax losses were generated.

Read more.

The publications contained in this site do not constitute legal advice. Legal advice can only be given with knowledge of the client's specific facts. By putting these publications on our website we do not intend to create a lawyer-client relationship with the user. Materials may not reflect the most current legal developments, verdicts or settlements. This information should in no way be taken as an indication of future results.

Search Tips:

You may use the wildcard symbol (*) as a root expander.  A search for "anti*" will find not only "anti", but also "anti-trust", "antique", etc.

Entering two terms together in a search field will behave as though an "OR" is being used.  For example, entering "Antique Motorcars" as a Client Name search will find results with either word in the Client Name.


AND and OR may be used in a search.  Note: they must be capitalized, e.g., "Project AND Finance." 

The + and - sign operators may be used.  The + sign indicates that the term immediately following is required, while the - sign indicates to omit results that contain that term. E.g., "+real -estate" says results must have "real" but not "estate".

To perform an exact phrase search, surround your search phrase with quotation marks.  For example, "Project Finance".

Searches are not case sensitive.

back to top