Mexico's 2027 Tax Bill Cuts the Interest Deduction Cap From 30 Percent to 20 Percent

Mexico's Federal Executive submitted the Paquete Económico 2027 to Congress on 8 September 2026, and the income tax initiative inside it would cut the net interest deduction ceiling from 30 percent to 20 percent of adjusted taxable profit. For anyone holding Mexican property through a leveraged Mexican company, that is the single most expensive line in the package.

What changed

The proposal amends Article 28, fracción XXXII of the Ley del Impuesto sobre la Renta, the provision that caps how much net interest a corporate taxpayer can deduct in a year. The ceiling drops from 30 percent of adjusted taxable profit to 20 percent. Interest that cannot be deducted under the lower cap does not disappear: unused capacity may be carried forward for ten subsequent years.

Two further limits arrive alongside it, aimed at resident corporations with annual income above 50 million pesos. Where authorised deductions equal or fall below 96.67 percent of taxable income, only 99 percent of those deductions may be applied in the year. Where deductions exceed that threshold, 96.67 percent becomes the maximum. Separately, prior-year tax losses would offset no more than 50 percent of current-year taxable profit, applied after the deduction limits, with carryforwards extended to 20 years and inflation indexation retained. The restriction also flows through to provisional ISR payments, so the cash effect lands during the year rather than at filing. Coordinated taxpayers, certain agricultural, forestry and fishing operations, maquiladoras, some newly established businesses and insurance institutions are excluded.

A third change is narrower but broader in reach. A new paragraph in Article 25 would make advance payments for services and for the temporary use or enjoyment of assets deductible only in the year the service is actually rendered or the use period actually occurs, with proportional treatment across multi-year arrangements. Prepaid rent stops being a front-loaded deduction.

Article 27, fracción V would also be reformed so that payments to foreign residents are deductible only once the payment has been made and the applicable ISR withholding has been remitted, with the withholding obligation triggered by whichever comes first: enforceability, accrual or payment.

The proposed effective date for most of the package is 1 January 2027.

The mechanism

This is a bill, not a law. Under the Mexican budget cycle the Executive submits the economic package, which bundles the Ley de Ingresos, the expenditure proposal and the tax initiatives, and Congress then takes it through committee before floor votes in both chambers. Nothing takes effect until the approved text is published in the Diario Oficial de la Federación, and the figures above can change in committee. The proposals arrived as initiatives on 8 September and are now in that process.

What it means for a foreign buyer

If you buy and hold Mexican residential property in your own name and pay cash, none of this touches you. Your exposure remains the predial, acquisition tax, and ISR on eventual sale.

The people affected are those who hold through a Mexican corporate vehicle with debt in it. That structure is common for foreign investors assembling several units, for short-term rental portfolios operating at scale, and for anyone who could not use a fideicomiso because the asset sits outside the restricted zone or because the holding is commercial. Cutting the interest ceiling from 30 percent to 20 percent of adjusted taxable profit raises the effective tax cost of leverage on exactly those structures. A vehicle that was fully deducting its interest at a 30 percent cap may now carry disallowed interest forward for a decade instead of using it now.

The Article 25 prepayment rule hits a specific and widespread practice. Long leases with rent paid up front, and multi-year service or management contracts prepaid to pull the deduction into a profitable year, would both have to be spread across the period of actual use. Anyone modelling a 2027 acquisition on a prepaid-rent deduction should re-run it.

The Article 27 withholding change matters for cross-border financing. Interest paid to a foreign lender, including a related-party lender, would only be deductible once the Mexican withholding has actually been remitted. Deductibility now depends on a compliance step, not just on the payment.

Context

Foreign nationals cannot hold direct title to residential land within 50 kilometres of the coast or 100 kilometres of a land border, and use a bank trust, the fideicomiso, or a Mexican company to hold inside that restricted zone. A Mexican company is the standard route where the property is commercial or where the buyer wants several assets in one vehicle, and that is the vehicle this bill reaches. Property tax itself, the predial, is municipal and is not touched by a federal income tax reform.

Related reading: how the fideicomiso lets foreigners own coastal property, the predial, fideicomiso and sale costs explained and property taxes in Mexico for foreign owners.

Sources

- Newsflash: Paquete Económico 2027, consideraciones sobre las propuestas fiscales, Ritch Mueller, 8 September 2026

- Paquete Económico 2027: nuevos límites a deducciones y pérdidas fiscales para empresas, Coela Abogados, 9 September 2026

- Reforma a la LISR 2027: nuevas reglas para intereses, pagos al extranjero, CUCA, CUFIN y estímulos fiscales, TaxToday México, 11 September 2026

- Presentación del Paquete Económico 2027, PwC México