IVA in Mexico is the Impuesto al Valor Agregado, a 16% value-added tax applied to most goods, services, leases, and imports across the country and collected by the Servicio de Administración Tributaria (SAT). A reduced 8% rate applies in designated border zones, and a narrow set of items are either zero-rated or fully exempt. If you shop, subscribe to a streaming service, or run a business in Mexico, IVA is already built into what you pay or what you must charge.
How the Tax Works
IVA is not a simple sales tax added only at the checkout. It is collected at every stage of the supply chain. A manufacturer charges IVA when selling to a distributor, the distributor charges IVA when selling to a retailer, and the retailer charges IVA when selling to the final customer. At each step, a business offsets the IVA it collected from customers (output IVA) against the IVA it paid on its own purchases (input IVA), and sends SAT only the difference.
A quick example. A retailer collects 10,000 pesos of IVA from customers in a month and paid 7,000 pesos of IVA on inventory. It owes SAT 3,000 pesos. If the numbers flip and input IVA exceeds output IVA, the business can request a refund or carry the credit forward to a later month. The final consumer, with no one to pass the tax on to, absorbs the full charge.
The Rates
The standard rate is 16% and covers the great majority of transactions: sales of goods, services, lease payments, and imports.
An 8% reduced rate applies in designated border zones along Mexico’s northern and southern frontiers, covering municipalities within roughly 20 kilometers of the border. The measure was introduced by presidential decree in 2019 to help border businesses compete with cross-border counterparts, and has been renewed periodically since. Because its continuation depends on the sitting administration, businesses in those zones should confirm with SAT or a local tax advisor that the reduced rate is still in force before relying on it.
Zero-Rated Versus Exempt
Not every transaction carries the 16% charge, and Mexican law distinguishes sharply between two kinds of relief. The difference is invisible to a shopper but decisive for a business, because it controls whether the seller can recover the IVA it paid on its own costs.
Zero-rated transactions (tasa 0%) are technically taxable, just at a rate of zero. Businesses selling zero-rated items still charge IVA (at 0%) and can claim credits or refunds for the IVA they paid on inputs. Zero-rated categories include unprocessed and staple foods, medicines, agricultural goods and services, exports, and books, newspapers, and magazines published by the taxpayer. A business dealing mainly in zero-rated goods often runs a persistent input surplus and can pull refunds from SAT.
Exempt transactions (exento) carry no IVA at all, and the seller cannot recover IVA paid on related purchases. That unrecovered IVA becomes a cost of doing business. Exempt categories include residential property sales and rentals, sales of land, medical services provided by licensed professionals, tuition and related educational services, most financial instruments and certain bank interest, and salaries and wages.
IVA on Digital Services
Since June 2020, foreign companies providing digital services to people in Mexico have been required to register with SAT, charge 16% IVA, and remit it. This covers streaming platforms, app stores, cloud storage, online marketplaces, and similar businesses with no physical presence in the country. If you subscribe to a foreign streaming service from within Mexico, the IVA is typically added automatically at checkout.
Digital platforms that act as intermediaries between buyers and sellers carry an extra layer of duty. They must withhold IVA (and in some cases income tax) on payments to individual Mexican sellers and issue electronic withholding receipts. As of 2026, a platform paying a Mexican business that supplies a valid RFC withholds 50% of the IVA; if the business fails to provide a valid RFC, the platform withholds the full 16%.
What Businesses Have to Do
Running a business in Mexico means handling IVA on every transaction, and the compliance load reaches well beyond adding 16% to invoices.
Monthly Filing
IVA is filed monthly. Each month you subtract input IVA from output IVA and remit the net to SAT by the 17th of the following month. If input IVA is higher, you can claim a refund or carry the credit forward.
Electronic Invoicing (CFDI)
Every business must issue an electronic invoice, called a CFDI (Comprobante Fiscal Digital por Internet), for every transaction. The current standard is CFDI 4.0, an XML format that requires the buyer’s tax ID (RFC), tax regime, postal code, and the intended use of the invoice. Issuer and recipient must both retain CFDI records for at least five years. SAT uses CFDIs as its primary tool for tracking IVA across the economy, and non-compliant invoices can draw fines of 5% to 10% of the invoice value. Repeated non-compliance can lead SAT to suspend a taxpayer’s digital seal certificate, which effectively stops the business from issuing invoices at all.
Withholding
When a company pays an independent individual for professional services, the company withholds two-thirds of the IVA and sends it directly to SAT on the individual’s behalf. The individual still reports the transaction but receives the payment net of that withholding.
Getting an RFC
Every business and individual with tax obligations in Mexico needs an RFC (Registro Federal de Contribuyentes) from SAT. Foreign residents who want to freelance or run a business must first hold temporary or permanent residency, obtain a CURP (issued on residency approval), and then book an in-person SAT appointment with passport, residency card, and proof of a Mexican address to complete RFC registration.
Late Payments
Missing the monthly deadline triggers surcharges. For 2026, the monthly surcharge on late tax payments is approximately 2%, applied for each month or fraction of a month that payment remains overdue. A three-month delay adds roughly 6% on top of the original tax. SAT can also fine businesses for failing to file, issuing incorrect CFDIs, or failing to register properly.
What Shoppers and Tourists Should Know
Mexican consumer protection law requires that prices shown to consumers include all taxes and charges, so the number on a menu or price tag already contains the 16% IVA, though your receipt or CFDI will usually break it out on a separate line.1PROFECO. Ley Federal de Proteccion al Consumidor Watch for one exception: professional services and business-to-business quotes are commonly presented before IVA, with the tax added on the final invoice.
Foreign tourists can reclaim IVA on purchases through a tax-free shopping program. To qualify, you must be a non-resident (typically on a tourist visa), spend at least 1,200 MXN per store, and pay with a foreign-issued credit or debit card. Cash purchases are eligible only up to 3,000 MXN per person. Shop at participating stores, ask for an invoice at the time of purchase, and visit a refund counter at the airport before departure with the goods in your luggage. Refunds can reach the full 16%, though processing fees reduce the amount you actually receive.