Companies in Mexico are facing an environment of increased tax scrutiny while assessing the potential effects of proposed changes to deductions for 2027 . Among the main risks are greater pressure on cash flow, increases in income tax and potential adjustments to the prices of goods and services.
The proposal from Mexico’s Ministry of Finance and Public Credit contemplates specific deduction limits for companies with revenues exceeding 50 million pesos . For low-margin companies, analyses by the Mexican Institute of Finance Executives (IMEF) indicate that income tax could increase by up to 66.5% under certain scenarios.
Increased scrutiny for companies
This new environment comes on top of amendments to the Federal Tax Code that expanded the powers of Mexico’s Tax Administration Service (SAT). The measures strengthen tax reviews, enable faster audits and allow the temporary restriction of digital seals when the authority identifies certain irregularities involving tax invoices.
Margarita Medrano , Tax Partner at Baker Tilly Mexico, explains that the tax reforms have significantly expanded the tools available to the authorities. These are complemented by technologies such as artificial intelligence and big data as well as the large volume of information the SAT receives through digital tax invoices.
Companies, in turn, have had to strengthen their internal controls. This includes adopting technology to monitor government publications, automating processes, training teams and conducting more detailed reviews of suppliers and customers.
Medrano warns that publications involving companies identified as issuers of irregular tax invoices can have consequences for third parties that have conducted transactions with them. “If you, as an entity, become aware—or fail to become aware—that someone with whom you have conducted a transaction has been listed as an entity issuing false invoices, you will have to self-correct and eliminate or reconsider any effect you may have given to those transactions with those companies.”
New limits on deductions
While companies adapt to these expanded enforcement powers, the proposal for 2027 introduces additional changes to the treatment of deductions. For companies with revenues exceeding 50 million pesos , deductions would be limited to 96.7% of taxable revenues when they exceed the proposed threshold.
For companies with lower deduction levels, the proposed limit would be 99% of taxable revenues . The purpose of the mechanism is to establish controls over the amount of deductions applied, although specialists have warned that its impact could vary significantly depending on each organization’s margins and financial structure.
The distribution, manufacturing and commercial sectors could experience significant effects because they often operate with narrow margins and high levels of deductible costs. In these cases, a percentage-based restriction could increase the taxable base even if the underlying economics of the business remain unchanged.
Tax losses and pressure on cash flow
Another proposed adjustment would limit the use of tax losses to 50% of taxable income in each fiscal year. At the same time, the proposal would extend the period available to use those losses from 10 to 20 years in order to preserve taxpayers’ ability to apply them.
However, this deferral could alter companies’ financial planning. If a business cannot immediately use all of its losses or deductions, it may face a higher tax payment in the short term, even when it retains the ability to apply them in subsequent fiscal years.
This effect is particularly relevant for cash flow and working capital because companies could be required to allocate resources to tax payments that could previously be offset through deductions or tax losses. The combination of broader enforcement powers and new restrictions makes it increasingly important to review transactions, documentation and tax projections in advance.
At Baker Tilly, we support companies in assessing tax impacts, strengthening compliance controls and developing strategies that help them anticipate regulatory changes and protect their cash flow.
Article originally published in Expansión, by Dainzú Patiño.
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