The Mexican government said in a decree last month that it will allow faster depreciation of new fixed assets acquired after January 27, 2025.

A large first-year depreciation deduction will be allowed and will vary by type of asset and the tax year in which the assets are acquired. For energy-related projects, deductions of up to 72% will be available during 2025 and 2026 and 67% will apply during the period 2027 through 2030.

The remaining project cost will be deducted over the remaining depreciable life. Mexican depreciation periods range from 10 to 20 years for gas-fired power plants, gas pipelines and transmission lines. The remaining depreciation is taken in a straight-line pattern.

The corporate income tax rate in Mexico is 30%.

The actual first-year depreciation allowances vary by project.

They are 56% for 2025 and 2026 and 49% for 2027 through 2030 for machinery and equipment used to generate, transmit or distribute electricity.

Machinery and equipment used to transport, store or process hydrocarbons, drilling platforms and vessels, and hydrocarbon processing and storage vessels qualify for first-year allowances of 72% for 2025 and 2026 and 67% for 2027 through 2030.

Land vehicles powered by rechargeable electric batteries, or with an electric motor that also includes an internal combustion engine or hydrogen-powered engine, qualify for first-year allowances of 86% for 2025 and 2026 and 83% for 2027 through 2030.

These depreciation allowances apply to assets in Mexico. It does not matter whether they are owned by Mexican or foreign companies. 

The new first-year allowances are not automatic. 

Companies must apply for them by submitting their investment projects to an evaluation committee comprised of representatives from the Ministry of Finance, the Ministry of Economy and an advisory council of business leaders appointed by the Mexican president. If approved, the committee will issue a compliance certificate enabling applicants to claim the first-year allowances.

Guidelines for applicants, the evaluation criteria and the operating procedures for the evaluation committee will be issued within 60 days after publication of the decree.

The allowances will apply from January 27, 2025 through September 30, 2030.

The total value of the tax incentives is capped at MXP 30,000 million (approximately US$1.5 billion) over the term of the decree. Of this amount, MXP 28,500 million (approximately US$1.42 billion) will be allocated for depreciation of new fixed assets, while the remaining MXP 1,500 million (US$75 million) will be designated for deductions for training and innovation expenses.

The evaluation committee will determine the maximum amount of tax incentives authorized for applicants each tax year.