Legislation to accelerate recovery of start-up capital for solar power and battery energy storage passed Mexico's lower house on Wednesday, clearing a final article-by-article review in a 322-115 floor vote.
The clean energy incentives — structured as accelerated depreciation rules under the federal income tax law (Lisr) — advance as a core element of the 2027 revenue package. The initiative now heads to the senate for ratification, which is expected to conclude well before the chamber's 31 October legal deadline to pass the revenue side of next year's budget. If approved, the new rules will take effect on 1 January 2027.
The tax reform proposal specifically aims to modify the federal income tax law, as part of an overhaul to Mexico's simplified tax framework (Resico). It establishes that eligible companies may double their annual tax depreciation rate on physical equipment and infrastructure to 40pc from 20pc. The provision could cut capex recovery times in half, typically to 2.5 years from 5 years, for small- and mid-sized solar and backup energy developers.
However, industry analysts point out a significant trade-off that limits the reform's broader impact. As the incentive is strictly tethered to the Resico framework, it is bound by the regime's updated annual gross revenue cap of Ps50mn ($2.6mn).
Renewable energy advocates argue the cap is too low and sets up a mixed outcome for the industry. While it stimulates small-scale distributed generation and commercial rooftop installations, utility-scale developers are largely excluded from the tax break.
Under the new Lisr, amortization is now limited to 50pc of taxable profit for these companies, a limit analysts argue creates a baseline annual tax cash drain regardless of cumulative development capex.
Furthermore, companies exceeding the revenue cap will now be restricted from fully utilizing the standalone 100pc immediate renewable asset deduction established under article 34 of the income tax statute.
Financing costs for capital-intensive generation networks also face adjustment, as the legislation lowers the threshold for net-interest deductions on corporate project debt to 20pc from 30pc of adjusted taxable income.
