Key Funding Incentives
1 | R&D Tax Credit
Mexico offers an R&D tax credit designed to incentivise companies to invest in technological R&D activities carried out within the country.
Mechanism: The tax credit amounts to 30% of expenses and investments for technological R&D. Crucially, this credit is applicable only on the incremental amount of qualifying expenses and investments that exceeds the average R&D expenditure incurred in the prior three fiscal years. The maximum credit is capped at MXN 50 million per taxpayer per financial year. The tax credit is generally non-refundable but can be carried forward for up to 10 years.
Eligibility: To qualify, projects must demonstrate a scientific or technological advancement through the resolution of uncertainty. Eligible expenses include fees for external researchers, experimental testing, fieldwork, technical training essential to the project, specialised lab equipment, prototypes, materials for experimental designs, and collaboration services from Mexican higher education institutions and public research centres.
Impact: This incentive encourages companies to continuously increase their R&D investments in Mexico, supporting scientific and technological breakthroughs. The program is managed by the National Council of Science and Technology (CONACYT), which assesses projects based on specific objectives and criteria.
2 | “Plan Mexico” Tax Incentives (Investment and Innovation)
The Decree granting tax incentives under the “Plan Mexico” strategy (published in January 2025) introduces a series of incentives aimed at boosting investment and innovation through 2030.
• Immediate Deduction of Investments (Accelerated Depreciation): This scheme allows companies to immediately deduct specified percentages (ranging from 35% to 91%) of new fixed asset investments acquired between January 2025 and September 2030. This provision provides a substantial tax benefit in the year of acquisition. The benefits are restricted to new investments or those used for the first time in Mexico, and companies must keep the assets in use for at least two years.
• Additional Deductions for Training and Innovation: The plan also provides an additional deduction equivalent to 25% of the increase in training costs for employees registered with Social Security (IMSS) for innovation-related activities. This additional deduction is calculated based on the positive difference between the current year’s training/innovation expense and the average expense from the three prior fiscal years.
• Eligibility & Conditions: Companies must meet specific tax compliance requirements, including not having valid tax credits, not being in liquidation, and not being on tax blacklists. Applicants must submit a detailed investment project to an Evaluation Committee and obtain a compliance certificate to qualify for the incentives.
• Impact: These incentives aim to attract and retain domestic and foreign capital, particularly in strategic sectors, fostering economic growth, job creation, and industrial modernization.
3 | National Council of Science and Technology (CONACYT) Programs
CONACYT is the primary governmental body responsible for promoting scientific research and technological development in Mexico. Its name was recently changed to CONAHCYT (Consejo Nacional de Humanidades, Ciencias, Tecnologías, e Innovación).
Grants and Scholarships: CONAHCYT’s primary focus has recently shifted toward supporting basic science, humanities, and critical national areas through scholarships and grants. The majority of its funding is dedicated to postgraduate scholarships and support for public research centres, rather than direct R&D funding for private companies.
Project-Based Funding:CONAHCYT continues to announce public calls for proposals, inviting individuals and companies to apply for financial support or tax credits for projects that meet specific objectives, although direct funding programmes for industrial R&D have been significantly reduced or discontinued in favour of R&D tax credits and scholarships.
Impact: CONACYT plays a pivotal role in strengthening Mexico’s scientific and technological capabilities, fostering research collaborations, and nurturing human capital in R&D.
4 | Support for Startups and Entrepreneurship
Mexico has implemented initiatives to facilitate the establishment and growth of startups.
Former INADEM: The National Institute of Entrepreneurship (INADEM) was dissolved in 2019, and its programs providing direct financial support to MSMEs and start-ups through public calls and matching grants were largely discontinued. Support for entrepreneurship is now primarily channeled through a decentralized network of State governments and public/private entities.
Incubators and Accelerators: A growing network of incubators and accelerators, including university-linked programs and corporate accelerators, provides mentorship, training, networking opportunities, and often initial funding to early-stage companies.
Impact:These programmes aim to bridge the finance gap for new businesses, promote high-impact entrepreneurship, and create a supportive ecosystem for innovative ideas to flourish.
5 | Venture Capital Landscape
Mexico’s venture capital (VC) landscape has been expanding significantly, driven by factors like nearshoring and a growing demand for technological solutions.
• Growth and Focus: The VC market is experiencing a surge in investment, particularly in sectors like AI, fintech, healthtech, renewable energy, and sustainability. Nearshoring, the relocation of supply chains to Mexico, is also attracting VC attention for innovative solutions in logistics and manufacturing.
• Key Hubs: Mexico City, Monterrey, and Guadalajara have emerged as major hubs for startup activities and VC investments, attracting both local and international funds.
• Impact: The increasing flow of venture capital is crucial for enabling Mexican startups to scale, develop advanced technological solutions, and compete in global markets.
Conclusion
Mexico’s innovation funding incentives represent a dynamic and evolving framework designed to stimulate R&D and support entrepreneurship. The combination of R&D tax credits, strategic tax incentives from “Plan Mexico,” and the ongoing support for human capital development from CONAHCYT provides essential support for businesses. Furthermore, a growing network of incubators, accelerators, and a rapidly expanding venture capital landscape are collectively fostering a more robust and attractive environment for innovation, contributing significantly to Mexico’s economic development and technological advancement.
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