Doing Business Essentials: Tax Controversy in Mexico

Updated edition, August 2026

This note was originally published in 2025. It has been updated to reflect three developments that materially change how tax disputes are managed in Mexico:

• the 2026 tax reform to the Federal Tax Code (CFF), published in the Federal Official Gazette (DOF) on November 7, 2025 and effective January 1, 2026, which made the guarantee of the tax liability necessary in order to suspend collection in every challenge, including the Administrative Appeal, and imposed a mandatory order of priority among the available forms of guarantee;
• the Decree amending Article 141 of the CFF, published in the DOF on April 9, 2026 and effective April 10, 2026, which reversed that mandatory order and restored the taxpayer's freedom to choose the form of guarantee; and
• the reform to the Federal Law of Administrative Litigation Procedure (LFPCA), published in the DOF on June 9, 2026 and effective June 10, 2026, which reshapes the trial before the Federal Administrative Justice Court (TFJA), with a broader tax review appeal for the authorities, stricter suspension standards, an expanded summary proceeding and shorter notification periods.

Together with the increase in surcharge rates under the Federal Revenue Law for 2026 (LIF 2026), the practical cost of litigating a tax assessment in Mexico is higher today than it was twelve months ago, and cash-flow planning has become part of the defense strategy itself.

Part I. Tax audits

1. Who is subject to tax audits in Mexico?

All taxpayers, regardless of size, may be audited by the Tax Administration Service (SAT). However, large taxpayers are under the jurisdiction of the General Administration of Large Taxpayers (AGGC), which handles audits for entities exceeding certain revenue thresholds or with complex operations.

2. What are the main audit powers of the SAT?

SAT may exercise its powers through (i) desk audits, (ii) field visits at the taxpayer's domicile, and (iii) electronic reviews. These procedures allow SAT to request documentation, review accounting, and assess tax compliance. Separately, SAT may also carry out verification procedures aimed at confirming that digital tax invoices (CFDIs) cover genuine transactions.

3. How long does a tax audit last?

Generally, an audit lasts 12 months from initiation.

• In desk reviews, the audit ends with an official "letter of observations" (oficio de observaciones). Taxpayers have 20 business days to submit evidence to rebut the findings.
• In field visits, the audit ends with a final report (acta final). Before this, SAT issues a last partial report, and taxpayers also have 20 business days to provide evidence to rebut the observations.

For transfer pricing audits, the audits may last up to 24 months, and before they conclude, taxpayers have 2 months to respond to the official notice of observations or the last partial report. This period may be extended by 1 month at the request of the taxpayer.

4. How is a tax audit commenced?

Audits begin with a formal order served on the taxpayer. For on-site visits, officials must present a written order of visit; for desk reviews, SAT serves notice through the electronic tax mailbox or a request of information in the domicile of the taxpayer.

5. What are the possible outcomes of an audit?

An audit may conclude with (i) no findings, or (ii) observations of potential non-compliance, which may subsequently give rise to a tax assessment determining unpaid taxes, surcharges, and penalties.

6. Can SAT restrict our digital seal certificate (CSD) as a result of a supplier's situation?

Yes. The 2026 reform added section XIV to Article 17-H Bis of the CFF, in connection with Article 49 Bis, section X. SAT may temporarily restrict the use of the CSD of taxpayers that received CFDIs from a supplier in respect of which the Article 49 Bis procedure has been concluded, where the recipient does not correct its tax position within 30 calendar days following the relevant publication in the DOF.

The restriction operates immediately and without a prior hearing. The taxpayer may file a clarification (aclaración), and SAT must allow use of the CSD until a resolution is issued. Because a CSD restriction halts invoicing, and therefore collections, it is in practice one of the most disruptive measures a business can face, and it should be monitored as an operational risk and not only as a tax risk. An amparo against the first act of application is frequently analyzed in these cases.

Part II. Alternative resolution before PRODECON

7. What is the Conclusive Agreement (Acuerdo Conclusivo) before PRODECON?

It is an alternative dispute resolution procedure before the Taxpayer Ombudsman (PRODECON). Taxpayers may request it during an ongoing audit. Once filed, it suspends the deadlines for the audit conclusion or the issuance of a tax assessment, depending on the stage.

8. What are the possible outcomes of a Conclusive Agreement?

The procedure may end with:

• A total agreement,
• A partial agreement, or
• No agreement.

It is commonly used to submit additional evidence, strengthen arguments, and negotiate factual matters with SAT.

9. Why has the Conclusive Agreement become more attractive in 2026?

Because the cost of moving into the contentious phase has increased. Since January 1, 2026, a taxpayer that wishes to stop collection while challenging an assessment must guarantee the tax liability, and surcharges accrue at higher rates under the LIF 2026. Resolving the matter during the audit, before an assessment exists, avoids both the guarantee burden and the accrual of accessories on a determined liability.

Part III. The guarantee of the tax liability (2026 regime)

10. What changed in 2026 regarding the guarantee of the tax liability?

Three changes, in sequence:

• Effective January 1, 2026, Articles 141 and 144 of the CFF were amended to require the guarantee of the tax liability in order to suspend collection whenever an assessment is challenged, including through the Administrative Appeal, for which a waiver previously existed. Article 141 also imposed a mandatory order of priority among the forms of guarantee, requiring the taxpayer to document the impossibility of using each preceding modality.
• Effective April 10, 2026, the Decree published in the DOF on April 9, 2026 eliminated that mandatory order. Taxpayers may again freely choose among the forms of guarantee listed in Article 141, without having to evidence their economic capacity or the impossibility of using a prior modality.
• The obligation to guarantee itself was not eliminated. What was reversed is how the guarantee is chosen, not whether it must be granted.

11. Is the guarantee a condition for the admissibility of the challenge?

No, and the distinction matters. Posting the guarantee is not a requirement for the admissibility of the remedy: an Administrative Appeal or a nullity claim may be filed, admitted and heard on the merits without it, and the challenge cannot be dismissed on that basis alone.

What the guarantee secures is the suspension of the administrative enforcement proceeding (procedimiento administrativo de ejecución). Absent a guarantee, the challenge proceeds, but SAT may pursue collection in parallel: attachment of assets, immobilization of bank accounts and, ultimately, forced sale. In practice this makes the guarantee unavoidable for most businesses, but for the right reason. It protects the balance sheet while the case is decided; it does not buy the right to be heard.

12. What forms of guarantee are available today?

Under Article 141 of the CFF, as currently in force, and at the taxpayer's election:

1. Deposit certificate (billete de depósito) issued by an authorized institution;
2. Letter of credit issued by an institution authorized by the National Banking and Securities Commission and registered with SAT;
3. Pledge (excluding intangible assets) or mortgage (excluding real estate with rural land characteristics);
4. Bond issued by an authorized institution, which does not enjoy the benefits of order and excussion;
5. Joint obligation assumed by a third party that evidences its suitability and solvency;
6. Administrative attachment of businesses, tangible movable assets and real estate, except those with rural land characteristics.

Two options that existed under the prior regime were eliminated by the 2026 reform: securities or credit portfolios, and the guarantee accounts formerly regulated by Article 141-A of the CFF.

13. What must the guarantee cover, and does it have to be updated?

The guarantee must cover the updated assessed contributions together with the accessories accrued to that date and those that will accrue in the following twelve months. Where the credit remains outstanding, the guarantee must be updated annually and, if it becomes insufficient, SAT may require that it be extended or order additional attachments.

This is where the LIF 2026 becomes financially relevant: because the guarantee is sized to include twelve months of accessories, the increase in surcharge rates translates directly into a larger guarantee.

14. What are the surcharge rates for 2026?

Under the Federal Revenue Law for 2026:

Late payment (mora)2.07% per monthExtension of payment (prórroga)1.38% per monthInstallments of up to 12 months1.42% per monthInstallments of more than 12 and up to 24 months1.63% per monthInstallments beyond 24 months, and deferred payment1.97% per month

These represent a significant increase over 2025, when the extension rate was 0.98% and the late payment rate 1.47%, and should be built into any decision on whether to litigate, settle or pay.

15. Is there any relief on the timing to post the guarantee?

Yes. Under the Twenty-Ninth Transitional Article of the 2026 tax package, for purposes of the first paragraph of Article 144 of the CFF, taxpayers that file a timely Administrative Appeal as of January 1, 2026 may constitute the guarantee within six months from the date the appeal was filed.

If the appeal is resolved before that six-month period elapses, the guarantee must be posted within ten days following the date on which service of the resolution becomes effective.

This is a meaningful liquidity window, but it is a deferral and not an exemption: the guarantee must still be in place, and failure to post it in time leaves the taxpayer exposed to enforcement.

16. We posted a guarantee in early 2026 under the mandatory order. Can we replace it?

The April 2026 Decree included a transitional rule allowing guarantee procedures initiated between January 1, 2026 and the entry into force of the Decree, as well as guarantees already constituted in that period, to be governed by the new text, provided the taxpayer expressly so requested before the tax authority within thirty calendar days following the Decree's entry into force, that is, by early May 2026. The authority was required to resolve within twenty business days, and the substitution would not interrupt the suspension of the enforcement proceeding.

That specific window has now closed. Taxpayers that did not use it should nonetheless review whether a substitution of guarantee is available under the ordinary rules, particularly where the original structure was driven by the now-repealed order of priority and is more onerous than necessary.

Part IV. Remedies against a tax assessment

17. What remedies are available against a tax assessment?

Taxpayers may challenge an assessment by filing either an Administrative Appeal before SAT or Administrative Litigation before the Federal Administrative Justice Court (TFJA).

18. What is the deadline to file an Administrative Appeal?

Within 30 business days from the date the assessment is formally served.

19. Is it necessary to guarantee the tax liability in an Administrative Appeal?

Yes, if the taxpayer wants collection suspended. This is one of the most consequential changes of the 2026 reform. The waiver previously contained in Article 144 of the CFF, which allowed a taxpayer to file an Administrative Appeal without posting a guarantee and still be shielded from enforcement, was eliminated as of January 1, 2026.

As noted in question 11, the guarantee is not a condition for filing or for the appeal to be heard. The practical mitigations are the six-month transitional period described in question 15, and the fact that the taxpayer may again choose freely among the forms of guarantee under Article 141.

20. Why is the Administrative Appeal generally recommended?

It is advisable to exhaust it because it is the last opportunity to submit evidence. In subsequent litigation, only evidence filed during the audit or in the Administrative Appeal will generally be admitted. This rationale is unaffected by the 2026 reform and has arguably become more important. Now that stopping collection requires a guarantee that carries a real financial cost for as long as the dispute lasts, and that the LFPCA reform allows the authorities to appeal nullities granted on procedural grounds, there is a strong incentive to resolve the matter at the earliest possible stage and on the strongest possible record.

21. What are the advantages of the Administrative Appeal?

• Deferred guarantee: six months from filing, under the transitional rule, rather than an immediate requirement.
• Faster resolution compared to litigation.
• Last opportunity to expand on evidence and arguments before going to court.
• No filing cost, and it does not preclude subsequent litigation.

22. What are the disadvantages of the Administrative Appeal?

• It is resolved by SAT itself, which may raise concerns about impartiality.
• Since 2026, suspension of collection requires the tax liability to be guaranteed, so it no longer offers a "guarantee-free" phase of defense.
• Surcharges continue to accrue during the procedure at the rates set out in question 14.

If denied, the taxpayer may file a nullity claim before the Federal Administrative Justice Court.

23. What is Administrative Litigation (Juicio Contencioso Administrativo)?

It is a judicial proceeding before the Federal Administrative Justice Court. The process concludes with a judgment, which may be appealed by either party. In principle, only evidence submitted during the audit or Administrative Appeal will be reviewed.

24. Is it mandatory to guarantee the tax liability in standard Administrative Litigation?

Yes, to obtain the suspension. To suspend enforcement of the assessment while the trial is pending, taxpayers must provide a guarantee: deposit certificate, letter of credit, pledge or mortgage, bond, joint obligation, or administrative attachment. Otherwise the trial continues, but SAT may initiate collection proceedings. Since 2026, the guarantee supporting the suspension in nullity proceedings and in amparo must be constituted in accordance with the modalities set out in Article 141 of the CFF.

25. What happens after the judgment in Administrative Litigation?

The judgment may be challenged by:

• The taxpayer, by filing a Direct Amparo within 15 business days; or
• The tax authority, by filing a Tax Review Appeal (recurso de revisión fiscal).

Both remedies are decided by a Federal Circuit Court of the Federal Judiciary, which generally issues the final ruling on the merits.

26. What is the Exclusive Trial on the Merits (Juicio de Resolución Exclusiva de Fondo)?

It is a special type of litigation in which only substantive issues are reviewed, excluding procedural defects. Taxpayers are not required to guarantee the tax liability while the case is pending, until the first-instance judgment is issued.

Given that a guarantee is now required to suspend collection both in the Administrative Appeal and in standard litigation, this feature has become the principal comparative advantage of this proceeding, and it deserves a deliberate cost-benefit analysis at the outset of any dispute, weighed against the fact that procedural arguments are waived.

Part V. The June 2026 reform to the LFPCA

27. What is the LFPCA reform of June 2026?

On June 9, 2026, a decree amending, adding and repealing various provisions of the Federal Law of Administrative Litigation Procedure was published in the DOF, effective June 10, 2026. It is presented as a modernization of the trial before the TFJA, through court deadlines, digitalization and a broader summary proceeding, but several of its provisions also strengthen the procedural position of the tax authorities.

Not all of it is in force yet. The rules on suspension, on the tax review appeal and on the summary proceeding applied immediately, while the electronic appearance of authorities in traditional-route trials is deferred by 180 calendar days, and the new notification regime and the maximum periods for the court to act are deferred by 240 calendar days. Each matter should therefore be assessed against the date on which the proceeding commenced.

28. How does the reform affect the suspension of the assessment?

Article 28 was amended in two directions:

• Favorable: the requirement that the harm be "of difficult repair" was repealed, removing an evidentiary burden from the applicant.
• Unfavorable: a catalogue was added under which the social interest is deemed affected or public order contravened, including where the suspension would allow the party to continue activities or services requiring a federal permit, authorization or concession without holding one, or to continue conduct constituting an infraction or an offense.

These changes have immediate effect and may affect suspension requests pending in ongoing trials, particularly in regulated sectors such as energy, health, transport and telecommunications. Suspension requests now need to be drafted anticipating the catalogue and evidencing, specifically, that the case does not fall within it.

29. How does the reform affect the Tax Review Appeal filed by the authorities?

Article 63 was amended in three relevant ways:

• The minimum amount in dispute was raised to 27,000 UMAs, replacing the former 3,500 minimum wages. The new threshold applies to judgments issued as of June 10, 2026.
• The appeal is now expressly available where the nullity was declared for defects of form or procedure, reversing the prior rule and case law that barred it in those cases.
• Resolutions deciding the complaint (queja) regarding repetition of the annulled act, or excess or defect in compliance with a judgment, became appealable. Under the Fifth Transitional Article this applies only to trials commenced after the reform entered into force.

The Agency for the National Customs of Mexico (ANAM) and its administrative units were expressly added to the authorities entitled to file the appeal.

The practical effect is that a win on procedural grounds is less final than it used to be, and litigation timelines should be estimated assuming a second instance.

30. What changed in the summary proceeding, and does it matter for refunds?

The threshold for the summary proceeding was doubled to 30 times the annual UMA, and resolutions of federal tax authorities on requests for refunds of contributions were added as a new ground for that proceeding. A maximum period of six months from admission of the complaint was established for the final judgment, subject to suspension by incidents, appeals or other proceedings that prevent its issuance.

The summary proceeding is not elective. Where the matter falls within the statutory grounds and threshold, it is the applicable route. Taxpayers should therefore identify from the outset whether a dispute, and a refund claim in particular, will be heard under it, because evidentiary windows are compressed, including for expert evidence, and the case must be prepared accordingly from the initial complaint.

Part VI. Reducing exposure and practical strategy

31. Can a taxpayer reduce a definitive tax liability without litigation?

Yes. Taxpayers may seek:

• Reduction of penalties under Article 74 of the Federal Tax Code; or
• Application of Article 70-A of the Federal Tax Code, which allows a reduction of up to 100% of the penalties and the application of a reduced surcharge rate, provided the statutory requirements are met.

Given the higher surcharge rates in force for 2026 and the guarantee burden, the economics of these mechanisms should be recalculated rather than assumed from prior experience.

32. What practical strategies should businesses consider?

• Keep accounting records organized and updated, and preserve evidence of the materiality of transactions with suppliers.
• Respond promptly to SAT's requests, and monitor the electronic tax mailbox daily.
• Consider a Conclusive Agreement before PRODECON, whose relative value has increased under the 2026 regime.
• Use the Administrative Appeal strategically to file all evidence, since it remains the last opportunity to do so.
• Plan the guarantee from day one: quantify the amount including twelve months of accessories, select the modality, and calendar the six-month transitional period.
• Assess the Exclusive Trial on the Merits, whose guarantee exemption is now a material advantage.
• Prioritize substantive arguments over procedural ones, and build the evidentiary record early.
• Prepare suspension requests against the new Article 28 catalogue.
• Recalibrate internal deadline controls for shorter notification periods and hybrid paper and electronic files.
• Seek specialized legal counsel at the earliest stage.

33. What should a foreign group with Mexican operations do right now?

Three concrete steps:

• Inventory all open assessments and pending appeals, and confirm the status and sufficiency of each guarantee, including whether an annual update is due.
• Model the cash-flow impact of the guarantee requirement and the 2026 surcharge rates across the expected duration of each dispute, and reflect it in treasury planning and in any group-level tax provision.
• Review active trials before the TFJA for the immediate effects of the LFPCA reform, in particular the new tax review appeal threshold, the repeal of the "difficult repair" requirement and the new grounds for denying suspension.

Important Notice

This material is provided for informational purposes only and does not constitute specialized legal advice. It reflects the legal framework in force as of August 2026. Each case depends on its particular facts and circumstances and should be analyzed individually, including the transitional regime applicable to each matter and the date on which the relevant proceeding commenced.

At Matus-Ruiz, we remain at your service to address any questions regarding the matters outlined above, and to provide tailored legal advice in connection with tax audits and controversies in Mexico.

Atentamente

Francisco J. Matusfmatus@matus-ruiz.com Norberto Ruiz Vázquez nruiz@matus-ruiz.com

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