Mexico: A Tax: Controversy Overview

Mexico enters 2026 facing a complex tax landscape, requiring businesses and taxpayers to prepare for significant changes in the country’s compliance environment. These modifications result from the federal government’s ongoing actions to enhance its collection capabilities through reforms, heightened enforcement, and the strategic use of technology in tax administration.

The Mexican Tax Administration Service (SAT) is expected to maintain its modernisation of oversight by leveraging artificial intelligence (AI) and big data analytics, ensuring greater scrutiny and precision in audits, including online revisions of taxpayers. Given these challenges, it is crucial for companies to adopt a proactive and preventative approach to compliance and risk management.

In the following, Von Wobeser y Sierra, a leading firm specialising in tax litigation, consulting and strategic advisory, provides a detailed overview of the most pressing tax issues that businesses will face in 2026, along with best practices for navigating these complexities effectively.

Continuity of Tax Policy and Reinforced Audits

In 2026, the SAT is expected to maintain an assertive audit posture, using AI-driven tools to detect irregularities. These mechanisms will increase the precision of audits while intensifying scrutiny. Businesses must reinforce internal controls to mitigate penalties.

Key recommendations include the following:

• strengthen internal controls – businesses should implement robust internal compliance mechanisms to ensure that financial records are consistently accurate and fully transparent;
• conduct periodic compliance reviews – regular internal audits are vital for identifying potential tax risks and addressing them before they escalate into an issue with the tax authorities; and
• seek specialised legal counsel – consulting with experienced tax attorneys is essential for anticipating and managing potential audit risks, ensuring that businesses remain compliant with evolving tax regulations.

Proactive and Well-Prepared Audit Responses

As tax authorities intensify their audit approach, businesses must ensure that they can respond both efficiently and strategically. Effective audit management requires preparation and comprehensive documentation of all financial transactions. Delays or failure to comply with requests can result in severe financial penalties and protracted legal disputes.

Best practices for managing audits include the following:

• maintain a comprehensive tax file – ensure that all financial records, invoices and tax returns are meticulously documented and easily accessible for immediate verification;
• respond promptly and accurately – delayed or incomplete responses to tax authorities can lead unnecessarily to additional scrutiny and potential financial penalties; and
• develop a preventative litigation strategy – companies should proactively have a legal plan in place to protect their interests from the outset, rather than merely reacting to disputes after they have already arisen.

Strategic Handling of Tax Reviews

More data-driven reviews require accuracy, timeliness and the ability to anticipate disputes. Key actions for effective tax review management include the following:

• ensure accuracy and compliance – all submitted tax information must be precise and in full compliance with current regulations;
• adopt a defensive strategy – businesses should prepare for the possibility of litigation by ensuring that all tax claims and deductions are well supported by verifiable data; and
• utilise risk assessment models – advanced analytics and AI tools can help anticipate potential red flags in tax filings, allowing companies to make necessary adjustments before an audit occurs.

Mexico Enters Uncharted Territory With Its New Judicial Reform and Changes to Tax Litigation

Mexico began a historic transition on 1 September 2025, when newly elected judges, magistrates and Supreme Court justices took office following the country’s sweeping judicial reform. This restructuring replaces the former Federal Judiciary Council with two new institutions – the Judicial Discipline Tribunal and the Judicial Administration Body – designed to strengthen oversight, enhance transparency and expand public participation in the administration of justice.

In parallel, important developments have emerged in tax litigation procedures. On 16 October 2025, amendments to the Amparo Law entered into force, conditioning the stay of execution in tax matters on the posting of a guarantee. This requirement aligns with another change that will become effective in January 2026, under which taxpayers must also provide a guarantee when pursuing administrative appeals beyond the six-month mark. Together, these reforms signal a shift towards more stringent procedural safeguards and increased emphasis on securing tax liabilities during litigation.

Key implications to monitor include the following:

• operational adjustments during the transition to the new judicial structure;
• heightened financial burdens on taxpayers due to mandatory guarantees in Amparo and administrative appeal stages;
• potential impact on access to judicial remedies for small and mid-sized taxpayers; and
• the need for updated litigation strategies to anticipate tighter procedural requirements in tax disputes.

Leveraging Alternative Dispute Resolution (ADR) Mechanisms

Local ADR options – including Conclusive Agreements before PRODECON and the new TFJA Public Centre for ADR – offer faster and more collaborative alternatives to traditional litigation. These mechanisms continue to gain relevance as taxpayers seek efficient ways to resolve disputes and reduce uncertainty in an increasingly complex enforcement environment.

In addition, Mutual Agreement Procedures (MAPs) and Agreements for the Reciprocal Promotion and Protection of Investments (APRIs) contained in international treaties have become viable tools for addressing certain interpretations of domestic tax rules and for safeguarding foreign taxpayers against abrupt legislative changes that may affect their investments in Mexico.

Recommended approaches include the following:

• use the full range of ADR options to seek early, cost-efficient resolution of disputes;
• evaluate the suitability of ADR on a case-by-case basis, considering the nature of the tax issue, potential financial and operational impact, and the likelihood of achieving consensus;
• adopt a strategic view of controversy management, integrating ADR as a preventative tool rather than as a last-resort alternative to litigation;
• consider treaty-based mechanisms such as MAPs to address cross-border tax disputes and resolve divergent interpretations of domestic and international tax rules; and
• assess whether APRIs offer additional protection for foreign taxpayers facing legislative or administrative changes that could affect the stability of their investments in Mexico.

Justifying Tax Benefits and Economic Substance

In 2026, tax authorities will maintain a significant focus on ensuring that taxpayers can fully substantiate the economic substance of their transactions. This requires companies to demonstrate that any claimed tax benefits are derived from genuine business activities, rather than from artificial arrangements designed solely for tax optimisation.

Best practices include the following:

• ensure that business transactions have clear economic justifications – every tax-saving measure should be backed by a legitimate business rationale beyond mere tax optimisation;
• maintain comprehensive documentation – all transactions and deductions must be supported by clear and well-organised documentation that can withstand a review by tax authorities; and
• strengthen internal compliance protocols – businesses should establish internal procedures to ensure that they meet economic substance requirements and can effectively defend their tax positions.

Compliance With Tax Incentive Requirements

As Mexico continues to refine its tax incentive programmes, businesses must stay updated on the latest eligibility criteria and compliance obligations. Authorities are expected to monitor the use of tax incentives more closely to prevent abuse or misapplication.

Key recommendations include the following:

• regularly review tax laws and incentive criteria – staying informed about legislative changes is crucial to ensuring continued compliance;
• maintain detailed records proving compliance – companies must document their adherence to incentive requirements to prevent disputes with tax authorities; and
• establish internal compliance mechanisms – implementing clear procedures for managing tax incentives can help prevent inadvertent non-compliance.

Conclusion

In 2026, successfully managing tax compliance in Mexico requires more than mere documentation; it demands proactive preparation, digital integration and strategic dispute resolution. With increased scrutiny and the SAT’s continuous modernisation, businesses must adopt a forward-looking approach to effectively mitigate risks and ensure robust regulatory compliance. By leveraging legal expertise, ADR mechanisms and robust compliance strategies, businesses can safeguard their financial and legal interests while optimising their tax positions in the coming year.