Mexico Senate Approves Tax Relief for Automakers

The Mexican Senate has approved an amendment to the Income Tax Law (ISR) for 2027 that would exclude certain automotive manufacturing operations from new restrictions on tax deductions and losses. The measure aims to preserve the sector’s competitiveness, protect investment, and prevent adverse effects on vehicle assembly and manufacturing in Mexico.

The amendment was incorporated into Article 78-E following a motion introduced by Emmanuel Reyes Carmona, chair of the Economy Committee, and supported by Ignacio Mier Velazco, Morena’s coordinator in the Senate.

The reform also establishes exceptions for companies engaged in the sale, distribution, and marketing of gasoline and diesel, recognizing the distinct cost structures, regulatory requirements, and operational characteristics of these activities.

The income tax reform introduces mechanisms to prevent taxpayers with annual income exceeding US$2.6 million from improperly using authorized deductions or tax losses to reduce their taxable income. However, lawmakers determined that applying these restrictions could create distortions in sectors characterized by high investment levels, substantial operating costs, and specialized tax and customs regimes.

Consequently, the Senate agreed to exclude companies authorized to operate tax warehouses for vehicle assembly and manufacturing, pursuant to Article 121, Section IV, of the Customs Law.

The amendment applies only to specific operations within the automotive manufacturing industry and does not grant a general income tax exemption to all automakers or auto parts manufacturers.

Approved during debate on the 2027 Economic Package, the amendment recognizes the automotive assembly industry’s specific tax and production characteristics, particularly those associated with manufacturing operations subject to specialized customs regimes.

The bill has been returned to the Chamber of Deputies, where lawmakers must review and vote on the Senate’s amendments before the legislative process can be completed.