100% depreciation for solar panels in Mexico: how to use it
Article 34, section XIII of Mexico's Income Tax Law (LISR) lets a company deduct 100% of a solar investment in one fiscal year. Conditions and limits.
Article 34, section XIII of the Mexican Income Tax Law (LISR) lets Mexican companies deduct 100% of their investment in machinery for generating energy from renewable sources in a single fiscal year. That makes a solar investment one of the few decisions that improves operations and your tax position at the same time.
For a company with enough taxable profit, the benefit comes to roughly 30% of the system’s cost recovered through tax savings in the first year. It is legal, it is in force in 2026, and very few companies use it fully, usually for lack of awareness or coordination with their accountant.
What the text says and how far it reaches
Article 34 of the LISR sets the annual deduction percentages for fixed investments. Section XIII says, specifically (our translation from the Spanish text):
“In the case of machinery and equipment for generating energy from renewable sources or efficient electricity cogeneration systems, […] 100% may be deducted in the first fiscal year in which the investment is made […].”
In practice, your company can deduct the full cost of the solar system against its taxable profit in the first year it acquires the system and puts it into operation. It is not a 10-year deduction. It is an immediate one.
Conditions to qualify:
- The machinery generates energy from a renewable source (solar panels fully qualify).
- The machinery stays in operation for a minimum of 5 years after the year in which the deduction was taken.
- The investments are kept in operation during that period.
If your company sells, retires or stops using the system before 5 years, it must pay back part of the deduction it originally took.
The financial benefit in numbers
The number that matters: with enough taxable profit, your company recovers roughly 30% of the system’s cost through tax savings in the first year.
Worked example:
A solar system costing MXN 2,500,000 for a mid-size industrial company. Annual taxable profit is enough to absorb the deduction.
- System cost: MXN 2,500,000
- 100% deduction in the first fiscal year: MXN 2,500,000
- Income tax saved (30% corporate rate): MXN 750,000
- Effective net cost of the system in year one: MXN 1,750,000
The system cost MXN 2,500,000 on paper, but its net cash impact was MXN 1,750,000. The difference (MXN 750,000) came back as income tax savings in the annual return.
On that lower net cost, the project’s ROI speeds up. A nominal payback of 4 years drops to about 3 effective years. That is a meaningful difference.
Why many companies do not use it
Three reasons come up again and again.
Management and accounting do not coordinate. The person evaluating the solar project, often in operations or general management, does not always bring in the accountant at the analysis stage. By the time the benefit is discovered, the project has already been structured another way.
Low or no taxable profit. The benefit needs profit to apply the deduction against. Companies with tax losses can carry the deduction forward to later years, but they lose the immediate effect. This has to be evaluated case by case.
Unfamiliarity with the specific legal framework. Some accountants are not aware of article 34, section XIII, or have not worked on solar cases. Validate with your tax advisor before you close the investment.
How to coordinate between management and accounting
Timing matters. The benefit applies to the fiscal year in which the investment is made. In some cases the project closing date has to be adjusted to optimize the fiscal year in which the deduction lands.
Practical steps:
- Before you sign a contract, confirm with your accountant that your company has enough taxable profit in the current fiscal year.
- If profit is not enough, consider moving the project to the next fiscal year.
- If your company has accumulated tax losses, evaluate how the deduction would apply against future profit.
- Check that your company can meet the condition of continuous operation for 5 years afterward.
Your accountant has the full information to run this analysis. PSE coordinates on the technical side but does not replace your tax advisor.
Combining it with other benefits
The 100% deduction can be combined with other mechanisms:
- VAT (IVA) credit on what you paid to acquire the system
- State incentives specific to renewable energy investment (these vary by state)
- FIDE financing, from the federal trust for electricity savings, which has preferential rates for energy efficiency projects
- Bank interest-free installment plans (MSI, meses sin intereses), which spread the payment over time while keeping the first-year tax benefit
The right combination depends on your company’s specific situation. Model it with scenarios before you decide.
What happens if you sell the system later
If your company sells the system, takes it out of operation or changes its use before 5 years of operation, it must pay back part of the deduction it originally took. The amount is proportional to the time the system did not operate.
This rarely applies to commercial and industrial systems, because solar systems have a useful life of 25 to 30 years and nobody sells them early. But if your company is considering selling the property where the system is installed, or making a drastic change to its operation, evaluate the tax effect first.
How PSE structures projects with this benefit
PSE is not an accounting firm. We cannot certify how the deduction applies to your specific case. What we do:
- Identify the benefit during the first conversation so you can take it to your accountant.
- Structure the project technically so it qualifies without ambiguity (the machinery generates renewable energy, operates at your tax address, and so on).
- Coordinate with your accountant to align the installation date with your tax planning.
- Deliver the complete technical documentation your accountant needs to apply the deduction.
If your company has significant taxable profit and is seriously considering a solar investment, the article 34, section XIII benefit can improve the equation considerably. It is worth talking to your accountant before you ask for a proposal, and reviewing which financing option to combine with the deduction.
Frequently asked questions
Does my company qualify if it is under RESICO (Mexico's simplified tax regime)?
RESICO for legal entities (personas morales) has its own specific rules. Validate with your accountant. Companies under the general regime for legal entities apply article 34 without restrictions.
Does it apply if I buy the system with a bank loan?
Yes. Acquiring the system through financing does not change how the deduction applies. The company acquires the asset and deducts its value; the loan payments are a separate financial matter.
What if I lease the system through a PPA?
It does not apply. Under a PPA, the system sits on the financier's books, not the customer's. The company that signs the PPA does not own the asset, so it cannot deduct something it does not own.
Can I combine the 100% deduction with interest-free installments (MSI)?
Yes, the two are compatible. The deduction applies to the fiscal year in which the asset is acquired. The monthly MSI payments are a financial matter. You capture the tax benefit in the first year regardless of when the loan finishes being paid.
What documentation does my accountant need to apply the deduction?
The electronic invoice for the system (PSE issues it), proof of installation and commissioning, and the interconnection contract with CFE, Mexico's state-owned electric utility, as proof of operation. PSE routinely delivers this documentation when a project closes.