Mexico included its first specific rules to combat hybrid tax mechanisms in the Income Tax Law through the tax reform that took effect on January 1, 2014. These rules were amended by a reform published in the Official Gazette of the Federation on December 9, 2019, and entered into force on January 1, 2020.

Mexico's domestic legislation (Article 5 of the Income Tax Law) establishes the effect of denying the crediting of taxes paid abroad when:

a) They have also been credited in another country or jurisdiction, except when the income that gave rise to the tax payment has also been accrued in the other country or jurisdiction.
b) The payment of the dividend or distributable profit has been deductible for the payer.

Furthermore, transparency for tax purposes of fiscally transparent foreign entities and foreign legal entities is no longer recognized, through the inclusion of Article 4-A in the Income Tax Law. And the regime regarding income generated through foreign entities or transparent legal entities is strengthened with the addition of Article 4-B to the Income Tax Law.

Article 28, Section XXIII of the Income Tax Law establishes that payments made to related parties or through a structured agreement are not deductible when the counterparty's income is subject to preferential tax regimes. This restriction does not apply when the payment is derived from the performance of business activities, unless hybrid mechanisms are used that generate deductions in Mexico and an exemption, non-taxability, or non-accumulation abroad.

Article 28, Section XXIX of the Income Tax Law establishes that payments made by a taxpayer that are also deductible to a member of the same group to which the payer belongs, or to the same taxpayer in another country or jurisdiction of which the taxpayer is also considered a tax resident, are not considered deductible.