MEXICO Law and Practice Contributed by: Carlos de la Garza, Raúl Acosta and Enrique Tamez, De la Garza & Acosta Abogados, S.C.
2.3 Taxation of Premium In Mexico, the taxation of insurance premiums is regu- lated primarily by the provisions of the Federal Fiscal Code ( Código Fiscal de la Federación ), the Income Tax Law ( Ley del Impuesto sobre la Renta ) and the Value Added Tax Law ( Ley del Impuesto al Valor Agregado ). The insurance premium is subject to Value Added Tax (VAT) at a rate of 16% of the premium amount paid by the policyholder. However, the withholding and remit- tance of this tax to the tax authority is the responsibil- ity of the insurance company. • home credit insurance that covers the default risk of borrowers of mortgage loans or with fiduciary guarantees intended for residential housing; • financial guarantee insurance that covers payment in the event of default by issuers of securities, credit instruments or documents that are subject to public offering or brokerage in securities mar- kets, provided that the funds from the placement of such securities, credit instruments or documents are used to finance mortgage loans or fiduciary- guaranteed loans for the acquisition, expansion, construction or repair of real estate intended for residential housing; and • life insurance, whether covering the risk of death or providing life annuities or pensions. There has been a long-standing controversy between insurance companies and the tax authorities regard- ing the crediting of VAT paid on expenses incurred in compensating policyholders. Historically, the tax authorities permitted such crediting, but in 2019 the Tax Administration Service ( Servicio de Adminis - tración Tributaria ) reversed its long-standing position and demanded that insurers pay VAT retroactively from 2015 onwards. The following are exempt from this tax: • insurance against agricultural risks; In late 2025, this dispute was finally addressed through a legislative settlement included in the Federal Rev- enue Law for 2026 ( Ley de Ingresos de la Federación 2026 ). Under the new transitory regime, the govern- ment agreed to waive alleged VAT liabilities on the condition that insurers cease crediting VAT paid to
suppliers in relation to claim settlements. Insurers may still credit VAT for goods or services used to repair or replace insured property until 31 December 2024, but thereafter the deduction will no longer be allowed. This arrangement is expected to stabilise the fiscal position of the insurance sector in the short term, while the restriction on VAT creditability for subsequent fiscal years is likely to increase operating costs and, con- sequently, premium prices for consumers. 3. Overseas Firms Doing Business in the Jurisdiction 3.1 Overseas-Based Insurers or Reinsurers In Mexico, any individual or legal entity that does not have the corresponding authorisation from the govern- ment is prohibited from entering into insurance opera- tions in the national territory. An insurance operation is understood as an agreement whereby one person undertakes to compensate another for damage or to pay a sum of money in the event of a future and uncer- tain event foreseen by the parties. Furthermore, in accordance with the Insurance and Bonding Institutions Law, it is prohibited to contract with foreign companies in the following cases. • Personal insurance: (a) when the policyholder is a natural person, and the contract is entered into within the national territory; or (b) when the policyholder is a legal person, and the insured resides within the national territory. • Hull, vessel or aircraft insurance, and all types of vehicle insurance, against risks inherent to the maritime and transport sectors, provided that such vessels, aircraft or vehicles are registered in Mexi- co or owned by individuals domiciled in Mexico. • Credit insurance, bond insurance, home credit insurance and financial guarantee insurance, when the insured is subject to Mexican legislation – in the case of financial warranty insurance, the pro- hibition does not apply when the securities, credit instruments or documents insured are exclusively offered in foreign markets. • Liability insurance, against civil liability arising from events that may occur within the national territory.
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