Are You a Foreigner Doing Business in Mexico? Here’s What You Need to Know About Tax Residency and ISR

Hi, I’m Jorge Cadena, CEO of Cadena Business Advisors, and I’d like to explain—very clearly—one of the most common concerns we hear from our foreign clients doing business in Mexico: tax residency and how it affects your Income Tax (ISR).

What is tax residency?

In simple terms, your tax residency is the country where the government considers you fiscally “at home.” In other words, where you are expected to pay taxes on your income.

It’s not just about your nationality or where you were born—it’s about where you actually live and where you generate your income.

How do I know if I’m a tax resident in Mexico?

According to Mexico’s tax authority (SAT), you may be considered a tax resident in Mexico if:

Mexico is your only permanent home.
Or, if you have a permanent home in Mexico and another country (such as the U.S. or Canada), then the SAT will determine where your center of vital interests is located — meaning where your family, main business, or most significant assets are.

If the SAT considers you a Mexican tax resident, you must pay ISR (Income Tax) on all your worldwide income — regardless of where it was earned.

What if I’m not a tax resident in Mexico?

If you are a non-resident, you are only taxed in Mexico on the income you generate within the country. For example, if you own a restaurant, develop real estate, or rent out property in Mexico, you will have to pay ISR on those activities.

Why is it important to define this correctly?

Because if your tax status isn’t clear, you could:

End up paying taxes twice (in Mexico and in your home country),
Make filing mistakes that result in fines or legal issues,
Miss out on deductions or tax credits.

What do we recommend?

At Cadena Business Advisors, we help foreign business owners:

Determine their correct tax residency,
Optimize their tax obligations using international treaties,
Avoid legal problems and maintain clear, compliant accounting.

If you’re a foreigner doing business in Mexico, understanding your tax situation isn’t optional—it’s essential. It’s the foundation for operating safely and growing confidently.

Have questions? Reach out. Our team is ready to guide you.