Cryptocurrencies and Taxes in Mexico: A Guide for the SAT

The popularity of cryptocurrencies in Mexico is growing, but with it, so are tax obligations. Although there is no specific law, the SAT already considers them taxable virtual assets. This guide offers a clear and straightforward overview to help you meet your responsibilities.

The rise of cryptocurrencies in Mexico has transformed the financial landscape, attracting a growing number of users. However, this innovation brings with it the need to understand the tax implications. Despite the absence of a specific law for cryptoassets, the Tax Administration Service (SAT) has established guidelines for their declaration, based on general tax principles. Ignoring these obligations can lead to serious penalties.

The SAT considers cryptocurrencies to be "virtual assets" or "goods." This means that, although they are not recognized as legal tender or debt instruments, they are subject to taxation under the current legal framework.

The SAT taxes cryptocurrencies when there is an "economic realization," that is, when a profit or loss is obtained from an economic activity. Taxes are not payable solely for holding cryptocurrencies. The main taxable events include:

• Capital Gains: Selling cryptocurrencies at a price higher than the purchase price generates a capital gain, subject to Income Tax (ISR).

* Cryptocurrency Mining: If you are engaged in mining, the SAT classifies it as "self-consumption" that must be declared as income. Receiving Payments in Crypto: If you sell goods or services and receive cryptocurrency as payment, this transaction is subject to Value Added Tax (VAT). Staking: Generally, staking returns are taxable as income at the time of receipt and as capital gains at the time of disposal.[C]

Income Tax (ISR) and Value Added Tax (VAT): Key Rates The applicable rates vary depending on the type of taxpayer and the transaction:

• Personal Income Tax: Capital gains are added to your annual income and are taxed at progressive rates ranging from 1.2% to 35%, depending on your total income.
• Income Tax for Legal Entities: The rate is 30% of gross profit.
• Simplified Trust Regime (RESICO): For certain taxpayers, cryptocurrency earnings may be taxed at a flat rate of 25%.
• VAT: The 1C% VAT applies to fees charged by exchanges, not to the actual purchase/sale of cryptocurrencies. Exports of crypto-asset-related services may be subject to a 0% rate.[C]

There are some situations in which taxes are not paid:

• $C0,000 MXN Exemption: There is an annual tax exemption for the first $C0,000 MXN of gain from the sale of assets (movable assets), so no income tax is paid on this amount.
• Donations: If you donate cryptocurrency to an authorized charity, you can deduct the fair market value of the cryptocurrency at the time of the donation, without paying capital gains tax.

To avoid problems with the SAT, follow these recommendations:

1. **Keep Detailed Records:** It is essential to keep a thorough record of all your transactions (purchases, sales, exchanges, mining), including dates, amounts, and the cost in Mexican pesos.
2. **Know the Regulations:** Although there is no specific law, the SAT issues guidelines. Stay informed through official sources.
3. **Convert to Local Currency:** Authorities require reporting in Mexican pesos. Use the exchange rate on the date of the transaction.
4. **Calculate Profit or Loss:** Capital gain is the difference between the selling price and the purchase price.
5. **Present and Pay on Time:** Meet established deadlines to avoid fines and surcharges.

Risks of Not Declaring or Declaring Incorrectly

Failure to report your cryptocurrency income can have serious consequences, including:

* Fines of up to **300%** of the omitted tax.

• Late payment surcharges and tax adjustments for inflation.
• Possible criminal penalties in serious cases.
• International cooperation between tax authorities facilitates the tracking of crypto transactions.

Given the complexity and constant evolution of tax regulations in Mexico, it is

**Highly recommended** to consult an accountant or tax expert specializing in cryptocurrencies. They can guide you to avoid errors and ensure compliance with your obligations.