The True Cost of Doing Business in Mexico: What Every Investor and Foreign Resident Needs to Know

Mexico remains one of the most attractive destinations for investing, starting a business, and establishing a second residence. However, the country's tax environment has changed rapidly in recent years, becoming a highly regulated territory with a level of scrutiny that many foreigners do not anticipate upon arrival.

In our daily work at Cadena Advisors, we see a recurring pattern: new businesses—especially those led by foreign residents—tend to focus on the commercial plan, operating costs, or market demand. However, they often overlook an element that is now decisive for the viability of any project: fiscal and regulatory compliance in Mexico. And that oversight comes at a very high price.

Mexico Has Perfected Its Digital Audit Tools

Mexico is not a fiscally permissive country. On the contrary, the SAT (Tax Administration Service) has perfected its digital audit tools, automatic information cross-referencing, and sanctions. Today, we frequently encounter cases such as:

• Fines ranging from 1.2 to 7 million pesos for failing to comply with obligations such as Anti-Money Laundering (AML) or Beneficial Ownership reporting.

• Suspension of Digital Stamps (CSD), which completely halts operations, preventing the issuance of invoices and stopping income flow.

• Electronic reviews or audits derived from discrepancies that many foreigners are unaware of because their home countries do not operate under a similar tax system.

The Most Common Mistake: Thinking Only About Operations, Not the Real Tax Burden

In the United States, Canada, or Europe, it is common for entrepreneurs to focus first on marketing, sales, and operations. In Mexico, that approach is insufficient.

Here, starting a business without considering the impact of taxes can lead to a huge surprise: tax authorities can claim up to 42% of profits, depending on the type of activity, revenue, tax regime, and business structure.

Many foreigners are shocked because their countries have simpler tax models or because they are used to a system where their previous accountant “just handled everything.” But in Mexico, tax compliance is technical, monthly, and highly regulated.

A complete business plan must include:

• Real tax costs.

• Surcharges (recargos).

• Withholdings (retenciones).

• Cash flow planning.

• Potential audits.

• Specific obligations based on the sector (real estate, hospitality, services, digital platforms, construction, etc.).

Ignoring these variables means starting at a disadvantage.

If You Are Going to Start a Business, Invest in What Will Prevent Losses

What we see most clearly today is that the mistake lies not in the business idea, but in the lack of fiscal structure from day one.

The most important recommendation for any foreigner living and doing business in Mexico is simple: Do not start without specialized tax and legal advice.

Do not rely on "figuring it out as you go." In Mexico, that approach costs millions.

With professional guidance, you can:

• Choose the correct tax regime.

• Avoid sanctions.

• Comply with AML regulations.

• Protect your assets.

• Build a project that can actually grow.

At Cadena Advisors, we specialize in serving foreign clients who seek to invest or start businesses in Mexico with clarity, transparency, and security.

Our goal is to help you navigate a complex tax system in the simplest way possible, so your business grows… without surprises.