2025 Annual Tax Return: Key Considerations for Individual Residents in Mexico and Foreign Investments

Individuals who earn income during a calendar year are required to determine their annual tax by filing the corresponding tax return in April of the following year. However, individuals who only earn cumulative income from salaries and interest may choose not to file an annual return if the total does not exceed $400,000 MXN, provided that real interest does not exceed $100,000 MXN and that the withholding referred to in the first paragraph of Article 135 of the Income Tax Law (LISR) has been applied to said income.

Income from Domestic Salaries and Interest In the case of individuals earning income from salaries, they will be required to file an annual tax return, among other scenarios, when:

• They obtain cumulative income other than salaries;
• They notify their employer in writing that they will file an annual return;
• They cease providing services before December 31 of the fiscal year or provide services to two or more employers simultaneously;
• They receive salary income from a foreign wealth source or from persons not obliged to perform withholdings according to Article 96 of the LISR;
• Their annual salary income exceeds $400,000 MXN.

A relevant aspect is the validation of pre-filled information by the Tax Administration Service (SAT), particularly regarding payroll CFDI and the interest and withholding statements issued by financial institutions. If discrepancies or incomplete information are identified, the taxpayer must make the necessary adjustments before filing the return.

Personal Deductions Another relevant element for determining annual tax is the personal deductions that individuals can apply. Among the main ones are:

• Medical and dental fees;
• Donations (up to 7% of the cumulative income of the immediately preceding fiscal year);
• Real interest on mortgage loans;
• Complementary retirement contributions;
• Medical expense insurance premiums;
• School transportation;
• Tuition fees (subject to limits per educational level).

It is important to note that the total amount of personal deductions may not exceed the lesser of five times the annual UMA value (for the 2025 fiscal year: $206,368.60 MXN) or 15% of the taxpayer's total income, including income for which no tax is paid.

Foreign Investments Individuals resident in Mexico are subject to ISR under a worldwide income scheme; therefore, they must accumulate income obtained abroad, regardless of the location of the source of wealth. In practice, it is common for some taxpayers to omit recognizing income generated outside Mexico under the premise that there is no obligation to declare it in the country, which is incorrect. This implies a significant tax risk, as in the event of an audit by the authority, omitted taxes could be determined, along with accessories and, where applicable, fines. Therefore, it is recommended to conduct a tax diagnostic of foreign investments to identify potential omissions and evaluate spontaneous regularization alternatives. This diagnostic should consider, among other aspects, the wealth structures used, including transparent entities and other foreign legal vehicles that may have specific tax treatment in Mexico. Furthermore, the potential receipt of income from Preferential Tax Regimes (REFIPRES) must be analyzed, as well as operations carried out through foreign transparent entities, in which case the corresponding informative return must be filed no later than May 31, 2026, in accordance with rule 3.19.5 of the current Miscellaneous Tax Resolution. Another element to consider is the foreign tax credit, which can be applied provided that the requirements stipulated in the LISR are met and the limitations applicable under domestic legislation and treaties to avoid double taxation are considered. Finally, for certain income, such as interest from abroad, individuals may choose to:

• Determine cumulative income according to the accrual method (detailed calculation), or
• Apply the factor published by the SAT to the amount of the investment at the beginning of the year (for 2025: 0.0484), according to rule 3.16.11 of the Miscellaneous Tax Resolution.

The choice of method should be evaluated considering its tax impact, including the possible generation and utilization of tax losses.

Final Considerations On March 2, 2026, the SAT enabled the simulator for the 2025 annual tax return, while the application for its submission will be available starting April 1, 2026. The deadline for filing the return is April 30, 2026, with no possibility of an extension. Additionally, individuals must report loans, donations, and prizes obtained during the year in their return when, individually or collectively, they exceed $600,000 MXN; otherwise, these concepts could be considered omitted income.

Closing At Baker Tilly Mexico, we have a multidisciplinary team that can support you from tax situation diagnostics to the review of wealth structures and compliance with tax obligations, including the analysis of foreign investments and the determination of their tax effects in Mexico. We remain at your disposal to address any questions or provide further information according to your needs.