The New Tax Credit Transforming Mexico into a Strategic Audiovisual Hub

On Sunday, February 15, the Federal Government announced a comprehensive support plan for the film industry in Mexico, featuring a highly attractive incentive for the sector. This support is equivalent to 30% of the total expenditureof an audiovisual project and can be applied directly against Income Tax (ISR).

This plan was formalized through a Decree published the following day in the Official Gazette (Diario Oficial). It is highly appealing not only to domestic production houses but also to international studios, such as Netflix, as it positions the industry as a strategic sector for both the country's economic and cultural policies.

It is crucial to note that this is not a traditional subsidy or a direct cash refund, but rather a sophisticatedly designed tax credit. This instrument allows the subsidy to be applied directly to ISR if there is a relevant tax liability; however, it also offers the possibility of transferring it for consideration, generating significant economic flow. This transfer can be directed in two ways: to suppliers directly related to the production chain, or to third-party suppliers, provided they are ISR taxpayers.

For this transfer to translate into a real benefit, the decree mandates compliance with caps and percentages, while requiring strict controls over both production expense eligibility and rigorous tax compliance. The direct beneficiaries of this scheme are those dedicated to the production of audiovisual works, including the post-production stage.

A key element of this decree involves the minimum required investments, which range from 5 to 40 million pesos depending on the project type—whether documentaries, documentary series, or feature films. These thresholds ensure the Decree targets medium-to-high-tier productions, securing a more relevant economic impact and preventing the incentive from being fragmented across low-impact projects.

This incentive, which will remain in effect through 2030 with an annual budget of 400 million pesos, recognizes and strengthens both national production houses and On-Demand digital platforms, enhancing their global competitiveness.

Furthermore, with this Decree, Mexico definitively positions itself as a production hub within the film industry. A major advantage is that this scheme is not restrictive; it allows for the simultaneous application of this incentive alongside other benefits, such as VAT recovery for filming exports or cash rebates. This significantly bolsters the industry’s international standing.

At Baker Tilly, we have supported the industry for over a decade, witnessing its growth and evolution. Consequently, we possess the necessary expertise to assist companies in successfully leveraging this tax incentive.