Overview

Mexico’s Federal Revenue Law for fiscal year 2026 (the “Law”) once again incorporates a capital repatriation incentive, offering preferential tax treatment for the return of funds held abroad. While this represents a meaningful opportunity, experience from prior years shows that its proper application requires careful planning, solid documentation, and precise execution to avoid future tax contingencies.

Capital Repatriation under Mexico’s Federal Revenue Law for fiscal year 2026: a Meaningful Tax Opportunity Requiring Careful Planning

With the publication of said Law, a tax incentive was introduced to encourage the return to Mexico of resources held abroad. This scheme is not new. Mexico has relied on similar mechanisms in previous years; however, experience shows that successful use of the incentive depends on careful planning, robust documentation, and technically sound execution.

What does this benefit consist of?

The incentive allows individuals, legal entities, and foreign residents with a permanent establishment in Mexico to return or bring into the country funds of lawful origin that were held outside Mexican territory until September 8, 2025. These funds are subject to a fixed 15% income tax (“ISR”) rate on the total amount repatriated or transferred, with no deductions allowed. This represents a significantly lower tax burden compared to ordinary tax regimes in Mexico.

Key requirements and conditions

To qualify for the benefit, the law establishes, among others, the following relevant requirements:

  1. The funds must derive from lawful activities.
  2. The resources must be transferred or returned to Mexico no later than December 31, 2026.
  3. The resources must be invested in Mexico and remain invested for a minimum period of three years.
  4. The income tax must be paid within 15 calendar days, together with the corresponding filings and notices.

Experience from prior years: lessons that should not be overlooked

A key element in evaluating this benefit is the practical experience of taxpayers during the prior capital repatriation decree. At that time, Mexico’s Tax Administration Service (“SAT”) publicly conveyed that the program was flexible and aimed at facilitating voluntary compliance, without a strict audit-oriented approach.

Nevertheless, several taxpayers who chose to repatriate capital were later subject to audits and reviews, mainly related to:

  • The origin and traceability of the funds.
  • The destination of the resources and their effective investment in Mexico.
  • Formal issues, such as errors in filings or foreign exchange differences.

In many cases, the program operated as a mechanism of asset visibility, allowing the Mexican tax authorities to access detailed information on structures, flows, and assets that had not previously been fully identified.

Conclusion: an opportunity that requires specialized guidance

Capital repatriation can be a strategic tool to optimize one’s tax burden, reorganize wealth structures, and promote investment in Mexico. However, experience shows that its successful implementation depends on solid advance planning and technically well-structured execution.