2025.10.18 – How to Navigate Mexico’s 2025–26 Tax and Utility Landscape: From Rumours to Reform and the Key Difference Between IVA and ISR

Key Takeaways

• There is no verified government decision stating that all taxes in Mexico will be doubled starting October 2025.
• The “2026 Economic Package,” submitted on 8 September 2025 (Europe/Amsterdam time), proposes selective tax reforms—especially affecting the Excise Tax on Production and Services (IEPS), Value-Added Tax (VAT), and digital-economy reporting obligations.
• For most households and regular taxpayers subject to Income Tax (ISR) or VAT, major changes are not expected until 1 January 2026, and subject to legislative approval.
• Utility-cost increases (electricity, water, gas) are more likely tied to inflation or consumption tiers—not a sweeping tax-rate doubling.
• Understanding the core distinction between IVA (consumption tax) and ISR (income tax) clarifies how tax policy affects spending versus earning.

Outline of Coverage

The following text covers all discussion points from the beginning of this thread up to 18 October 2025 (Europe/Amsterdam time). It addresses: the tax-doubling rumour, individual taxpayer concerns regarding the Mexican tax authority (SAT), utility cost questions, explanations of IVA versus ISR, and the reform proposals contained in the 2026 Economic Package.

The Rumour vs Verified Facts

Online claims suggested that Mexican taxes would automatically double from October 2025. A review of official sources found no universal doubling measure. Instead, the reforms under consideration are targeted—applying to specific goods, services or digital economy transactions—not to all taxpayers.

What the 2026 Economic Package Actually Proposes

• On 8 September 2025 the federal executive submitted its 2026 Economic Package to Congress, introducing reforms to VAT, IEPS, the Federal Tax Code and customs/tariff laws.
• Key proposals include:
• VAT and income-tax withholding rules for digital platforms: e.g., 50 % VAT withholding + 4 % income-tax on sellers with Mexican tax ID; 100 % VAT withholding + 20 % income-tax when no tax ID is provided.
• IEPS increases: gambling and sweepstakes tax may rise from ~30 % to 50 %; flavoured beverages in Mexico may face an 87 % excise-quota rise; violent or adult-content video games may face 8 % IEPS plus 16 % VAT.
• Tariff and customs reforms: import duties on goods from countries without a Free Trade Agreement (FTA) may increase up to 50 % for certain classifications.
• These changes are not yet law and many are set for 1 January 2026 if approved and enacted.

What It Means for Taxpayers & Households

• If you pay taxes to SAT: your standard ISR and VAT rates remain stable for 2025. Major changes are unlikely in that year.
• If your consumption of electricity, water or gas stays the same: any increase in bills will likely stem from inflation or regulatory adjustments rather than a blanket tax hike.
• If you operate via digital platforms, or sell goods/services in sectors targeted by the reform (gambling, sugary drinks, adult-games, some imports), you may face enhanced compliance or higher rates in 2026.
• As the reforms still require congressional approval, the final wording, thresholds and effective dates may shift.

Why the Government Is Making These Changes

• Mexico’s tax-revenue-to-GDP ratio is relatively low; the government seeks to strengthen the fiscal base without broad tax hikes on all citizens.
• The reform agenda emphasises:
• Expanding the tax base (especially digital platforms and non-resident sellers)
• Improving enforcement and closing loopholes (e-invoicing, real-time data, stronger auditing)
• Imposing so-called “healthy taxes” on products with societal cost (sugary drinks, tobacco, gambling)
• Supporting domestic industry by increasing tariffs on imports from non-FTA countries.

Understanding the Key Taxes

Value-Added Tax (VAT)

An indirect tax on the consumption of goods and services. In Mexico, the general rate is 16 %. Consumers bear the cost; businesses collect it and remit it to SAT.

Income Tax (ISR)

A direct tax levied on income or profit of individuals and companies. Rates in Mexico vary: individuals face progressive rates (approximately 1.92 % up to ~35 %) and companies typically around 30 % of net profit.

Key Difference

VAT taxes what you spend; ISR taxes what you earn. This distinction helps explain why changes in utility bills (consumption) differ from tax obligations on earnings.

Conclusions

• The narrative that all taxes in Mexico will double from October 2025 lacks factual support.
• Tax reform exists, but it is selective, aimed at certain sectors, with most changes planned for 2026.
• For most households and individual taxpayers, the short-term impact is modest.
• Having clarity on the difference between VAT and ISR helps understand how policy changes may affect your spending or earnings.
• Keeping an eye on official sources and final legislative developments will be important as reforms progress.

Sources

• https://kpmg.com/us/en/taxnewsflash/news/2025/09/mexico-2026-economic-package-proposed-indirect-tax-reforms.html — KPMG summary of the 2026 Economic Package’s indirect-tax reforms.
• https://vatabout.com/mexicos-2026-vat-reforms-digital-platforms–b2b-transactions — Analysis of VAT reforms related to digital platforms under the 2026 package.
• https://www.whitecase.com/insight-alert/mexico-proposes-significant-customs-and-tariff-reforms-part-2026-economic-package — White & Case article on customs/tariff changes.
• https://www.fiscal-requirements.com/news/4436 — Article on digital-platform obligations and IEPS increases in Mexico’s tax reform.
• https://www.youtube.com/watch?v=jzt3sRKBR84 — YouTube video “Fiscal effects of the 2026 Economic Package” (Mexico).