Crypto Tax Legislation & Law in Mexico

There is no specific regulation for crypto-assets in Mexico, therefore their taxation is based on the general principles set by the general national tax laws in force.

On this basis, income or holdings of crypto-assets are subject to Income Tax (ITAX) and related activities are subject to Value Added Tax (VAT) under the general principles set forth in national tax law.

It is worth noting that the Mexican Taxpayer’s Ombudsman (Prodecon) issued a non-binding preliminary study regarding the tax regime applicable to crypto-assets in November 2021, which is the most comprehensive approach for this topic to date in the country.

According to the Central Bank of Mexico, crypto-assets have the nature of virtual assets (i.e. removable tangible property). Per Article 17, section XVI of the Anti-Money Laundering Law (LFPIORPI), a virtual asset is a digital representation of value used among the public as a means of payment for all types of transactions, whose transfer can only be carried out by electronic means.

On this basis, income or holdings of crypto-assets are subject to Income Tax (ITAX) and related activities are subject to Value Added Tax (VAT) under the general principles set forth in national tax law.

Under Income Tax Law (ITL), Mexican residents are required to pay ITAX on a worldwide basis. Foreign residents with a permanent establishment (PE) in the country are required to pay ITAX on the income attributable to the PE, and foreign residents without a PE are only required to pay ITAX on income from a source of wealth located in Mexican territory.

Mexican residents carrying out purchase and sale transactions of crypto-assets through exchange platforms located abroad are not exempted from paying the corresponding ITAX.

In the case of Mexican resident individuals not conducting professional activities, an advance payment of ITAX is required at a 20% rate on the gross amount of the consideration; this must be withheld by the buyer provided that the latter is resident in Mexico, or resident abroad with a PE in Mexico. Otherwise, the seller will be required to make an advance payment through a tax return that shall be filed within the following 15 days. An advance payment is not required when the amount of the transaction is equal to or less than MXP $227,400.

Mexican resident corporations are not required to make advance payments of ITAX for each transaction, but are obliged to perform monthly advance payments generally applicable based on a profit quotient over the aggregated amount of gain or loss in the period. According to ITL, corporations should recognise income on an accrual basis.

It is important to point out that, in order to deduct the amount in which the crypto-assets were acquired, several requirements shall be met under domestic law, including the issuance of a seller invoice complying with Mexican regulations. This practical difficulty is not easy to overcome, and it implies the non-deductibility of the cost of the crypto-assets.

The sale of crypto-assets will be taxed with VAT at 16% if the transaction is performed in Mexico, i.e. for intangible assets, if the seller and buyer are both located in Mexico.

But, on a general basis if the buyer carries out a business activity and is properly registered and/or incorporated as such, a tax credit will be granted for the same amount (virtual VAT).

If the seller is located in Mexico and the buyer is located abroad, the transaction will be deemed an export and VAT will not apply (0%).

No, the main difference is that the exchange of crypto-assets will be deemed two separate sales, and the fair market value of the exchanged assets should be compared to determine if there is a gain or loss for each party.

If individuals conduct entrepreneurial activities (i.e. purchase and sale transactions for the purpose of speculation), they will be taxed as a business and not as regular individuals. The different treatment in the transactions will arise from the frequency and purpose of the activity, and there is no clear threshold.

The tax regime in such case will be similar to the one applicable to corporations, therefore individuals conducting professional activities will not be required to make advance payments of ITAX for each transaction, but will be obliged to perform monthly advance payments generally applicable based on a profit quotient over the aggregated amount of gain or loss in the period.

1. crypto-assets on gains of crypto-assets
2. other income from other activities with crypto-assets
3. another category?

There is no specific regulation for losses obtained from crypto-asset transactions, therefore the general principles contained in domestic law will be applicable, i.e. it will be possible to offset losses obtained from such transactions with income of any category if they qualify as authorised deductions.

However, in practice it is not possible to determine where the service receiver is located and where the service is benefited, the VAT rate is difficult to determine.

The tax losses incurred in a fiscal year may be deducted from the taxable income of the same and the following 10 fiscal years until that is exhausted. The losses are non-transferrable.

The tax losses incurred in a fiscal year may be deducted from the taxable income of the same and the following 10 fiscal years until that is exhausted. This time frame is generally applicable to corporations and individuals who carry out business activities. These losses are non-transferrable, and other individuals are generally not entitled to deduct them.

NFTs are taxed in the same way as crypto-assets, i.e. virtual assets (i.e. movable intangible property). However, a case-by-case analysis should be made since accounting or tax differences could arise under certain circumstances.

Mining is taxed as income derived from rendering services for ITAX purposes, and is also subject to VAT at 16% if performed in Mexican territory.

If the service receiver is located in Mexico and the provider is located abroad, the transaction will be deemed an import and VAT will be triggered at 16%, but the service receiver will be granted a tax credit for the same amount (virtual VAT).

The service may be deemed an export if rendered by persons located in Mexico and profited by persons located abroad, subject to VAT at 0%; additional specific and formal requirements should be met.

Crypto-asset mining rewards will be taxed on an accrual basis, considering the fair-market-value of the consideration. When the mining rewards are disposed, they will trigger a capital gain or loss (depending on how the price of the crypto-assets has changed since its accrual).

National law does not specifically refer to staking, so it shall typically be taxable both as income on an accrual basis and as capital gains upon disposal. There are no differences in taxation of the validator and the delegator. In general, the commentaries regarding mining activities will be applicable

Mexican law does not provide different tax regimes for those specific activities, but all of them will trigger ITAX if any income is obtained.  

Mexican law establishes a specific tax regime for intermediation services between third parties – suppliers of goods or services and the demanders of these – that are provided by digital means. Therefore, if the sale of crypto-assets is carried out by intermediaries through digital platforms, such provisions will apply.

In accordance with the Value Added Tax Law (VATL), digital intermediation services are those in which intermediaries intervene between third parties – suppliers of goods or services and the demanders of such goods or services – for which a consideration is charged. Airdrops and hard forks will be generally subject to ITAX as a capital gain on a fair market value. Lending is generally subject to ITAX over yields.

These services will be deemed as performed in Mexican territory and will be subject to VAT at the general rate of 16% when the:

• recipient has represented an address located in Mexican territory
• recipient of the service makes payment through an intermediary located in Mexican territory
• IP address used by the electronic devices of the recipient of the service corresponds to Mexico, and/or
• recipient declares a telephone number whose code corresponds to Mexico.

If the sale of crypto-assets is carried out by intermediaries through digital platforms, the service is subject to VAT. Digital platforms are required to register before the Mexican tax authority and comply with many obligations, the failure to do so is subject to fines and banning to perform activities in the country However, in Mexico no exchange is currently register under this regime.

In addition, in terms of Article 7 of the ITL, investment funds are part of the financial system in Mexico. In this regard, the Mexican Central Bank, the Ministry of Finance and the National Banking Securities Commission issued a statement through which they informed that Mexican financial institutions (such as investment funds) are not authorised to perform and offer to the public operations with virtual asses (i.e. crypto-assets). Furthermore, they also mentioned that those who issue or offer such instruments will be liable for any infringements to the regulations that this may cause and will be subject to the applicable sanctions. This is also applicable in connection to the latest tokenization projects related to real estate.

It is important to mention that, in terms of the Law to Regulate Financial Technology Institutions (LRITF), the only financial institutions authorised to carry out transactions with crypto-assets – prior authorisation from the Banco de México – are the Collective Financing Institutions and the Electronic Payment Fund Institutions (IFPE).

In general terms under the Mexico Money Laundering Law (MMLL), the rendering of independent services in those cases in which resources, securities or any other assets (e.g. crypto-assets) are managed for clients will be deemed non-financial designated activity and subject to compliance.

Other non-financial designated activities are the:

• habitual and professional offering of virtual asset exchange by non-financial institutions through digital platforms
• management, trading, facilitation or execution of transactions for the purchase or sale of such assets owned by customers
• provision of services for the safekeeping, storage or transfer of such virtual assets.

The main obligations arising from performing non-financial designated activities are:

• know Your Customer
• keeping custody of information and documentation supporting vulnerable activity
• submission of reports to the Ministry of Finance and Public Credit.

There are no relevant tax implications different from those described in the questions above. However, it is important to bear in mind that Mexican tax residents investing in tokens issued by DAOS or foreign legal entities (mainly located in preferential tax regimes), have reporting and tax obligations (e.g., REFIPRES, transparent entities) and non compliance is subject to material fines and