Mexico’s 50% Gaming Tax Proposal: What It Really Means and How Operators May Pivot

Kevin Jones
4 days ago
6 min read

Mexico’s latest fiscal proposal places the gambling sector under close scrutiny. The 2026 Economic Package, now before Congress, includes a sharp rise in the IEPS tax on games with bets and sweepstakes from 30% to 50%, while also bringing online and non-resident providers formally into scope. The measure has drawn attention for its headline rate, but the underlying mechanics matter just as much: IEPS is levied on turnover rather than net gaming revenue. For operators, that distinction could significantly alter product economics, compliance structures, and competitive dynamics. With lawmakers due to decide by 31 October, the months ahead will determine whether Mexico adopts one of the most demanding tax regimes in the region, or whether legislative adjustments moderate its impact.

The proposal, in plain terms

On 8 September 2025, Mexico’s Executive submitted the 2026 Economic Package to Congress. Among multiple fiscal measures, it proposes increasing the IEPS rate on games with bets and sweepstakes from 30% to 50%, and critically bringing online and non-resident providers squarely into scope. The package is before lawmakers until 31 October 2025; if enacted, it takes effect 1 January 2026.

Key mechanics (as drafted):

Scope expansion: Online betting/casino including non-residents providing digital services to users in Mexico (B2C and B2B flows).
Nexus & compliance: Foreign providers must register for RFC, appoint a legal representative, keep a Mexican tax domicile, collect/remit IEPS, and comply with withholding if operating via digital intermediaries.
Enforcement: SAT (tax authority) to gain online, real-time access to operational data; temporary internet blocking for non-compliance.

Multiple local and trade outlets have covered the headline rate increase, often bundling it with proposed “healthy taxes” on sugary drinks, tobacco and a new 8% IEPS on violent/adult video games, but the betting increase is the change with the most direct impact on our sector.

The most important nuance: what the tax is levied on

Mexico’s IEPS is an excise tax. For betting/sweepstakes, the underlying IEPS law calculates the base as the total amounts effectively received from participants; in betting contexts, “the total amount of bets”—i.e., turnover, not GGR. That’s been the design at the current 30% rate, and EY’s summary of the 2026 initiative explicitly restates the base as “valor total de las apuestas o cantidades percibidas.”

Two other legal details matter for modeling:

The law allows limited offsets, including credits for the federal “participation” under the Gaming Law and state gaming taxes up to 20% of the IEPS, important, but not transformative at the magnitudes under discussion.
The IEPS sits on top of other taxes (e.g., corporate income tax/ISR). (General frameworks referenced in ICLG and other overviews.)

Bottom line: Some industry coverage has called this a “50% GGR tax.” The legislative text and Big-Four notes point to a 50% excise on turnover, unless Congress amends either rate or base during the approval process.

What would that do to P&L?

To anchor the order of magnitude, consider typical holds:

Sportsbook hold (global context): ~9% in mature U.S. markets recently.
Online slots often target ~96% RTP (≈ 4% house edge).

Illustrative stress test (purely directional): If IEPS is charged on every $100 wagered, a 30% rate equates to $30 tax; 50% equals $50 tax. Compare that to the operator’s GGR:

Sportsbook @ 9% hold: $100 handle ⇒ $9 GGR. 30% IEPS ($30) ≈ 333% of GGR; 50% IEPS ($50) ≈ 556% of GGR.
Slots @ 4% hold: $100 handle ⇒ $4 GGR. 30% IEPS ($30) = 750% of GGR; 50% IEPS ($50) = 1,250% of GGR.

Even allowing for credits (e.g., state-tax offset up to 20% of IEPS) and operational nuances, the directional conclusion is clear: at face value, a 50% turnover tax is economically prohibitive for most verticals unless the base is changed, the rate is lowered, or operators can pass through significant cost (which is constrained competitively).

Market context: who’s exposed?

Mexico is a top-three LatAm online market by traffic and revenue growth, with a mix of strong local incumbents (e.g., Caliente) and international brands (e.g., Codere Online, Bet365), often via local partnerships/permits. Codere Online continues to call out Mexico as a key revenue driver, with €26.3m of revenue and €29.0m NGR in Q2 2025 alone. Caliente remains the most-visited gambling site in Mexico by a wide margin.

The regulatory framework still rests on a 1947 federal law administered by SEGOB, with online addressed only partially in regulations, one reason the tax reform seeks to pin down digital nexus and collection.

Likely operator responses (and how strategies may shift)

Pricing & product economics

Sportsbooks: Expect margin hardening—reduced odds generosity, fewer parlay boosts, tighter pricing on long-tail markets. Reduced promotional spend can raise effective hold but will pressure acquisition. (U.S. data show holds trending near 9–10% as promos tightened and parlays surged.)

Casino: Lower-RTP content strategies (where permissible), fewer high-RTP titles, re-weighting to games with superior turnover/gross margin ratios.

Promotions & affiliates

Promo pullback (free bets, bonus spins, risk-free mechanics) to protect unit economics; affiliate CPA/rev-share terms likely renegotiated downward or pushed to hybrid models.

Product mix & portfolio

Reprioritise toward verticals and bet types with higher implied hold (same-game parlays, props) and lower transaction cost per unit handle.

Explore non-wager adjacencies (fantasy/sweepstakes/skill) where legally viable; viability depends on Mexico’s forthcoming regulatory clarity (separate from tax) and enforcement posture.

Operating model & supply chain

Supplier negotiations: Push platform and content providers for lower rev-share, volume tiers, or turnover-based caps to absorb part of the shock.

Local partnerships: Given explicit non-resident registration and withholding rules, some international brands may deepen ties with Mexican permit-holders (or restructure to onshore more functions) to share compliance and reduce exposure.

Compliance & tech stack

Immediate builds if enacted:

RFC registration, Mexican rep & domicile, CFDI (e-invoicing) readiness, and tax engine reconfiguration (B2C/B2B, RFC-present vs. absent, platform withholding).
Real-time data feeds to SAT and audit-grade evidence of transactions (photos/video/data per proposed CFDI substantiation rules).
Prepare for blocking risk contingencies (alternate domains/apps) while aiming for compliance to avoid service disruption.

Government affairs & litigation posture

Industry bodies will likely lobby for relief, focusing on base clarification (move to GGR-based assessment) or rate moderation, or expanded credits to avoid channelisation to the black market.

In parallel, Mexico is exploring a modernised gaming law—industry has publicly called this a “very important” step—creating a window to synchronise regulatory and tax frameworks.

Channelisation risk is real

High effective tax burdens erode the regulated market’s value proposition. Colombia’s experience (a different tax lever, but instructive) shows that adding VAT on online bets was linked by industry to double-digit declines in legal activity soon after implementation, an indicator of migration to low-tax or untaxed channels. Mexico’s proposal risks pushing price-sensitive play to offshore or informal alternatives unless enforcement (blocking) is airtight and legal options remain competitively priced.

What’s actually most likely to happen?

Three scenarios for planning purposes (not predictions):

As-is passage (50% on turnover, strong enforcement)
- P&L shock; many operators reduce footprint, pivot to high-hold products, cut promos, and renegotiate supply. Short-term revenue contraction, higher ARPU per retained user, weaker acquisition, elevated grey-market leakage despite blocking.
Compromise in Congress (lower rate and/or GGR base)
- Politically plausible middle ground. A GGR-based IEPS or a lower rate would align with global practice, preserve more of the regulated market, and still deliver incremental revenue.
Phased implementation + clearer offsets
- A gradual glide path (e.g., 30%→40%→50%) or broadened credits could limit immediate disruption while SAT stands up enforcement tech and platforms adapt.

Action list for operators (next 30–90 days)

Model the impact under multiple bases (turnover vs GGR) and rates (30/40/50), including state-tax offsets and federal participation credits per IEPS Article 5-B; quantify effects by vertical and by acquisition cohort (promo burden).

Tax & data plumbing: Scope RFC registration, Mexican representation, CFDI issuance, withholding mechanics for platforms, and real-time data visibility for SAT. Build/tune tax engines accordingly.

Commercial resets: Open talks with platforms, content studios, PSPs, and affiliates on cost-sharing and revised economics (revenue share caps, hybrid CPA, traffic quality floors).

Product & promo triage: Prioritise high-hold funnels (without breaching UX fairness), eliminate promo burn that can’t clear hurdle rates, and adjust RTP mix where permitted.

Government affairs: Align with Mexican associations/permit-holders to advocate for base clarity and rate moderation; coordinate evidence on channelisation risk and consumer-protection implications.

Board-level risk plan: Prepare blocking and service-continuity scenarios; stress-test cash flow, debt covenants, and growth guidance tied to Mexico exposure (Codere Online’s public disclosures highlight material reliance on Mexico).

What to watch between now and 31 October 2025

Congressional mark-ups to the IEPS chapter—especially any shift from turnover to GGR or changes to credits/withholding.
SAT administrative rules (expected by year-end) detailing registration, data access, and blocking triggers.
Signals from SEGOB on the broader gaming law refresh, which could modernise online authorisations and harmonise oversight with new tax collection ambitions.

If enacted as drafted, Mexico’s move would be one of the most aggressive fiscal shifts facing a large LatAm market. not simply because of the 50% headline rate, but because IEPS targets turnover, not net win. The government’s goal is explicit: expand the tax net to digital and cross-border actors and harden enforcement. The industry’s counter-case writes itself: without rate/base calibration, the reform risks hollowing out the regulated channel, weakening consumer protections and sending play offshore.

For leaders with Mexican exposure, this is a now problem: build the tax/compliance plumbing, reprice products and promos, renegotiate supply chains, and engage constructively in the legislative process. The window for influence is open until 31 October 2025; what gets passed will shape Mexico’s gaming economics for years.

Topic	Source	What It Covers / Relevance
Mexico – IEPS law text	Ley del Impuesto Especial Sobre Producción y Servicios (IEPS) – Justia México	This is the full text of Mexico’s IEPS law as posted on Justia. Useful for the existing legal baseline. (Justia)
Mexico – Law on Games & Sweepstakes	Ley Federal de Juegos y Sorteos – Justia México	The gaming law defining permitted games & sweepstakes under federal law, which helps in context about regulation of legal games. (Justia)
Colombia – VAT / tax impact on online gambling	Coljuegos enfrenta efectos del IVA…	Reports that gross revenues from betting dropped ~30% after VAT was introduced in Colombia. Useful comparative evidence of channelisation or shrinkage risks. (MundoVideo Corporation)