Mexico Caps Corporate Deductions as U.S. Lobby Pushes Back

Mexico’s lower house approved changes to the income tax law on Tuesday, Nov. 3, and sent it to the president for publication. The US Chamber of Commerce urged revisions to a package the Senate had already approved. The law caps deductions for companies earning more than 50 million pesos, about US$2.7 million; automakers and gas stations are exempt. The Chamber’s letter arrived after the Senate vote.

A Lobby’s Demands, After the Vote

Neil Herrington, senior vice president for the Americas at the US business lobby, signed a letter addressed to Mexican Senator Yunes. Published Tuesday, it asked Mexico’s Senate to change the 2027 tax package, arguing its rules could affect companies with real operations, including U.S. firms. The Chamber said limits on deductions could raise taxes for U.S.-owned businesses in Mexico and reduce investment.

The Chamber said it supports efforts to combat tax abuse, but argued the proposals also reach ordinary business costs, including payroll, inventory and leases. It called the result a “minimum taxable-profit threshold.” The objections come from a corporate lobby seeking to shape tax rules across borders. Mexico’s Congress, though, has already passed the law in both houses.

The letter made 11 recommendations. They included keeping the 30% limit on deductible interest, allowing full use of earlier tax losses and keeping advance payments flexible. The Chamber also called for transition rules for existing investments, technical dialogue with affected industries before final rules, and a safe harbour for companies with real operations, electronic invoices and a clean compliance record.

Who Pays, According to the Lobby

The Chamber said reducing the share of interest companies can deduct from 30% to 20% of adjusted taxable income would raise the cost of capital. It argued that limiting the use of past tax losses to 50% of taxable income could undermine investment plans made under earlier rules. Provisional payments, it said, could exceed a company’s expected annual tax and strain cash flow.

It also warned that limits on deducting payments to foreign residents could cause double taxation and conflict with the Mexico-US tax treaty. The letter said new transfer-pricing limits could undo advance pricing agreements already reached by Mexican and U.S. tax authorities. The Chamber didn’t name the companies behind its concerns. The article cited no figures for U.S. investment, jobs or lost output.

The president’s office must publish the law in the official gazette before it takes effect on Jan. 1, 2027. Officials hadn’t given a publication date, and the documents reviewed contained no official Mexican response or decision on the Chamber’s requests. From 2027, Mexican units of U.S. firms above the income threshold could face tighter deductions, potentially affecting investment, hiring, treaty arrangements and transfer-pricing deals.

Factories Offer Another Warning

Mexico’s S&P Global manufacturing Purchasing Managers’ Index fell to 49.5 in October 2026, down from 50.3 in September. The October figure missed analysts’ 50.1 forecast by 0.6 points. Below 50, more factories report worsening conditions than improving ones. The report described the shift as a marginal deterioration, not a slump.

Mexico’s factories sell most of their exports to the United States, making the survey an early indicator of trade flows north of the border. But one month is a warning, not a trend; the report said the next two readings would help show whether the dip continued. Details on orders, output and hiring behind the headline weren’t available.

Polymarket put the probability of Banxico holding rates in November at 68.0%, and the probability of a 25-basis-point cut at 31.6%, with US$301,086 traded. Reported at 1:27 a.m. ET on Nov. 4, 2026, those figures are bets, not polls. A weak factory survey is only one of several inputs a central bank can weigh.