Written for Mexico. This analysis applies to Mexican federal tax law — ISR (income tax), IVA (VAT) and SAT rules — and cites Mexican statutes. Amounts are in Mexican pesos (MXN).
There's a combination in the Mexican tax system that produces total burdens that look like a typo — and it's perfectly legal because each piece is the express design of the legislature: RESICO for individuals (the simplified regime, 1% to 2.5% income tax on amounts collected) applied to an activity that charges no VAT (exempt or 0%-rated). The result: of every $100 you collect, the tax authority takes between $1 and $2.50 — and your customer pays not one peso of VAT on top. No offshore structure or aggressive position produces better numbers at this level of risk: practically zero.
The arithmetic of the formula
A typical taxpayer under the general regime bears income tax of up to 35% on profit plus the administration of 16% VAT. The one running the formula: 1–2.5% income tax on gross revenue, with no VAT to charge. Take the star case — the housing landlord: MXN 80,000 a month in rent from unfurnished apartments. Rental is included in RESICO for individuals, and rent of unfurnished residential housing is VAT-exempt. Total burden: ~$1,200 of income tax a month (1.5%). Zero VAT. No complex bookkeeping. Compare it against the same flow under the traditional rental regime (progressive rate after the blind deduction) or in a company (30% + a dividend layer): the formula wins by multiples.
Who can put it together
- Landlords of unfurnished housing — the cleanest version: VAT-exempt under art. 20, RESICO under art. 113-E, with no inventory or employees. The perfect profile for the formula.
- The agricultural sector — non-industrialized products at the 0% rate: you not only charge no VAT, you also recover the VAT on your inputs through a refund. And note: genuine AGAPES (farming, livestock, forestry and fishing activities) also have their own regime with income-tax exemptions that can beat RESICO — you compare the two before choosing.
- Trade in basic foods and other 0%-rated goods — the grocer, the distributor of art. 2-A products: 0% rate with crediting, RESICO on income tax as long as it fits under the cap.
- Services exempt in certain cases (certain medical services by individuals, education with official recognition) — with the caveat below about what "exempt" costs.
Does your activity — or part of it — fit the formula?
The diagnostic answers three questions with your numbers: whether your activity qualifies (or can be legitimately reorganized to qualify), how much you save against your current regime, and how your trajectory looks against the $3.5M cap — because the formula is so good that the temptation to force it is the only real risk. For housing-rental portfolios, this analysis is practically mandatory.
The fine print — because there always is some
Exempt is not 0%: in the exempt variants (housing, medical) the VAT on your expenses isn't recovered — for the landlord it barely stings (few VAT-bearing inputs that matter); in activities with a cost chain it does weigh; the 0% variants are economically superior because they credit and recover. The cap rules: $3.5M collected per year — the formula is for mid-sized personal and wealth flows, not for the large operation; going over gets you expelled, and landing without a plan is expensive. RESICO discipline: timely filings and obligations kept current — the regime forgives little. No deductions: if your activity has heavy expenses, run the comparison — the minimum rate on gross can lose to regimes with deductions when the margin is thin.
Frequently asked questions
Can I be on RESICO for my rentals and another regime for my other activity?
The general rule of RESICO for individuals is exclusivity with the traditional business regimes — within RESICO you can combine the activities that art. 113-E allows (business + professional + rental), but it can't coexist with the general activities regime on the side; wages and interest do coexist, with nuances. The architecture of who-collects-what within the family is where this restriction is resolved legally.
I rent 3 furnished, executive-style apartments — do I qualify?
RESICO yes (it's a rental), but the VAT exemption no: furnished loses it — you charge 16% and half the formula collapses. The furnish/don't-furnish decision is, among other things, a VAT decision: run the numbers on premium furnished rent against exempt rent before you buy the furniture.
What happens the year I go over $3.5 million?
You exit RESICO into whatever regime applies — and getting back in isn't easy. That's why the formula is run with projection: if your portfolio is going to grow, the transition plan (which assets migrate into a corporate structure, which flows stay with the individual) is designed a year ahead, not once the cap has already caught up with you.
Let's talk about your case
The first step is always the same: an honest diagnostic of where you stand. Write to us on WhatsApp or call — same business-day response.