Foreign individuals and entities with income sourced in Mexico are subject to tax obligations before the Tax Administration Service (SAT). Under Mexican tax law, foreigners must pay income tax (ISR) on earnings derived from Mexican territory or attributable to a permanent establishment in the country. In many cases, the tax is fulfilled through withholding by the Mexican payer, who must calculate, retain, and report the corresponding amount to the SAT. When no withholding occurs, the foreign taxpayer must directly calculate and pay the tax through the appropriate SAT filing mechanisms.

Foreign residents earning income in Mexico without a permanent establishment must comply with specific obligations, including issuing electronic invoices (CFDI) for professional services, leasing activities, or temporary use of goods. Taxes paid through withholding or direct payment are generally considered final, meaning that foreigners in these categories are not required to file an annual return. Additionally, individuals or entities in Mexico making payments to foreign residents must convert foreign‑currency payments into Mexican pesos for tax purposes and ensure timely monthly reporting, typically no later than the 17th day of the following month.

Mexico’s tax framework also interacts with international tax treaties designed to prevent double taxation, which may reduce withholding rates on dividends, royalties, or interest for residents of treaty countries. These treaties, aligned with OECD standards, hold constitutional hierarchy and can override domestic tax rules when applicable. Foreigners operating businesses or establishing a permanent establishment in Mexico must also comply with broader tax obligations, including corporate taxes, VAT, and periodic reporting, depending on the nature of their activities.