Mexico: 2026 Economic Package includes proposed indirect tax reforms

Mexico’s Executive on September 8, 2025, submitted the 2026 Economic Package to Congress, introducing proposals that tighten value added tax (VAT), excise tax (IEPS), income tax (IT) and tax code (CFF) rules. These measures will be under legislative review until October 31, 2025. If approved, the rules will be in force beginning January 1, 2026. Additionally, the Mexican Tax Administration (SAT) is expected to issue administrative rules by the end of this year to clarify and operationalize some of these changes.

Expansion of withholdings mechanism on transactions made through digital platforms facilitating the sale of goods and services when they collect the price on behalf of the seller

• The proposal extends the VAT and IT withholding regime to Mexican legal entities (B2B), applying the same logic currently used for Mexican individuals. In this respect, digital platforms would need to withhold:
  • 50% VAT withholding and 4% IT, when the seller (legal entity) provides a Mexican tax ID (RFC) to the digital platform
  • 100% VAT withholding and 20% IT when the seller does not provide an RFC
• Additionally, platforms would be required to withhold 100% VAT in the following scenarios:
  • Sales of goods made by nonresidents when the goods are in Mexico
  • When the price of the sales, services or temporary use or enjoyment of goods are deposited into foreign bank accounts, regardless of whether the seller is a Mexican or nonresident
• Platforms would be required to issue e-invoices (CFDI) of withholding for the above-mentioned transactions.
• Platforms would also be required to report information for all sellers, including legal entities, nonresidents, and Mexican sellers with offshore settlements—even if the platform does not process the payment. The SAT will issue further administrative rules.
• The reform aims to address avoidance schemes, such as individuals posing as legal entities or nonresidents using Mexican RFCs to bypass platform obligations.
• Finally, the IT withholding rate applicable to Mexican individuals who sells or provide services through intermediation platforms increases from 1% to 2.5%.

Online betting and sweepstakes

• The excise tax rate on betting and sweepstakes increases from 30% to 50%.
• The proposed reform now explicitly includes online betting and sweepstakes offered by nonresidents, with or without the authorization or permits to operate issued by the government, aligning the place-of-taxation with the customer’s location in Mexico.
• The 50% excise tax rate would apply to both business-to-business (B2B) and business-to-consumer (B2C) transactions, whether offered directly by the digital provider or through intermediation platforms, if the latter, a withholding mechanism applies.
• Foreign providers and platforms would be required to obtain an RFC, appoint a legal representative, tax domicile, collect and remit the excise tax, among other compliance obligations similar to current digital service rules for VAT. Noncompliance would result in the temporary suspension of Internet access to the platform (kill switch).

Video games with violent, explicit or adult content

• The reform proposes to apply an 8% excise tax rate on the sale of video games with violent explicit or adult content, in “physical format,” when the sale is made in Mexico on B2C transactions, in addition to the 16% VAT. Imports are excluded from this rule.
• The tax also would apply on the access, or download of video games with violent, explicit, or adult content, in addition to the 16% VAT. If these are provided by foreign providers and platforms, these would need to register and obtain an RFC and comply with similar obligations as the current digital service rules for VAT.
• In terms of new fiscal responsibilities, providers and platforms facilitating the sale of such video games would be required to:
  • Identify which video games are considered subject to the tax (violence classification criterion)
  • Periodically report to the SAT the revenues obtained from these sales
  • Issue tax receipts detailing the tax paid, separating it from other indirect taxes such as VAT
• Non-compliance would result in the temporary suspension of internet access to the platform (kill switch).

General rules on oversight and enforcement

• The Executive proposes a new requirement for digital platforms, both foreign and Mexican, to provide the SAT with online, real-time access to operational data and records related to Mexican transactions. The SAT will publish technical specifications through general administrative rules.
• Non-compliance may result in temporary suspension of internet access to the platform (kill switch).

CFDI technical compliance and real transactions

• Until now, CFDI requirements have focused mainly on formal and technical aspects. However, the proposed amendments would introduce a new substantive requirement by requiring CFDIs to represent actual, real transactions. It would therefore no longer be sufficient to simply follow the technical process for issuing a CFDI as the underlying transaction would need to genuinely occur, such as the delivery of goods, provision of services, or execution of valid legal acts. If this requirement is not met, the receipt would be presumed false and subject to general penalties.
• To ensure compliance, taxpayers would be required to evidence that the transaction took place through the use of technological tools such as photos, videos, and audio recordings.
•  The SAT would be allowed to request such evidence, and taxpayers would have five days for presenting the evidence and fifteen days for resolving the case.
• If, following such a request, a receipt is found to be false, the name and RFC of the issuer would be published on the SAT website and official gazette.

KPMG observation

• B2B exposure: Marketplaces facilitating B2B transactions would be subject to VAT withholding and reporting obligations, expanding the compliance perimeter beyond B2C.
• Registration and nexus: Nonresident platforms offering digital services to Mexican users—especially in betting or sweepstakes—may face new excise tax registration and compliance obligations, in addition to VAT.
• Operational adjustments: Platforms must reconfigure tax engines to apply differentiated withholding logic (e.g., RFC-present vs. absent; offshore settlements) and build full-population reporting infrastructure.
• Dual compliance: Operators may need to manage parallel VAT and IEPS obligations, including reporting, withholding, and technical integration.
• Data readiness: Real-time data access requirements will demand system-level mapping and governance aligned with SAT specifications.
• Risk of service disruption: Non-compliance could lead to temporary blocking of services in Mexico, reinforcing the need for proactive readiness.
• AR and AP process updates: While the reform primarily affects AR processes (issuance of CFDIs), AP teams should also monitor CFDI validity to avoid accepting or deducting expenses based on potentially invalid invoices. Additionally, businesses will now be required to document that the transactions invoiced effectively took place

These proposals form part of the 2026 Economic Package and remain under congressional debate. Scope and mechanics may change during the legislative process. If enacted, SAT is expected to issue administrative rules clarifying registration, nexus, reporting, withholding, and data-access requirements.

Read a September 2025 report prepared by the KPMG member firm in Mexico

For more information, contact a KPMG tax professional:

Antonio Zuazua |  azuazua@kpmg.com.mx

Philippe Stephanny | philippestephanny@kpmg.com