How to pay contractors in Mexico

How to choose: four questions for paying a contractor in Mexico

1. Pesos or dollars, and how many land? Unless the contractor lives in the 20 km border strip or in Baja California or Baja California Sur, they cannot hold a USD account at a Mexican bank (bbva.mx, checked 2026-09-28). A USD wire therefore gets converted at the receiving bank’s rate, and BBVA México adds USD 30 plus IVA for receiving it (BBVA fee schedule, checked 2026-09-28). A mid-market transfer that delivers pesos by SPEI costs far less: Wise quotes USD 7.67 to send USD 1,000 by direct debit (wise.com, checked 2026-09-28). PayPal takes 4.45% + USD 0.30 on an international commercial payment and 3.50% over the base rate to convert to pesos (paypal.com/mx, checked 2026-09-28). If the contractor wants pesos, pick a rail or platform that converts near mid-market and pays out by SPEI. If they want to keep dollars, a Payoneer or platform USD balance works, and the conversion cost moves to the day they withdraw.

2. How much do you pay each contractor per month? Platforms charge a percentage of each payout, a monthly seat, or a mix. At 3%, a percentage fee equals a $29 seat at about $967 a month, a $40 seat at about $1,333 and a $49 seat at about $1,633. Below roughly $1,000 a month per contractor, percentage pricing is cheaper; above about $1,600, a seat costs less. The USD-to-MXN spread comes on top of either fee, and it can be the larger cost: PayPal’s 3.50% conversion markup alone exceeds a 3% platform fee. Compare the pesos that land for the same invoice on the same day, not the headline price.

3. Who produces the paperwork? The contractor issues a CFDI for each payment whatever rail you use: it is their tax record with SAT, addressed to you under the generic foreign RFC XEXX010101000 (siemprecontable.net, 2026-09-21, checked 2026-09-28). What varies is the rest: the services contract, your own invoice records, and evidence that the service was used abroad, which the contractor needs to justify the 0% IVA rate. The VAT regulation points to a service contracted by a non-resident and paid from accounts at foreign financial institutions (Kreston BSG, checked 2026-09-28). If the contractor already sends CFDIs and you have a signed contract, a transfer service is enough. If you pay a team or want the contract and an invoice generated with every payout, choose a contractor platform with a document flow and keep collecting the CFDIs.

4. Does the engagement look like employment? Mexican labor law tests subordination: personal work under another’s direction for pay (LFT Art. 20, checked 2026-09-28). A contractor on fixed hours, working only for you, with no deliverables in the contract fits that profile. Reclassification brings the statutory employee package, including mandatory profit-sharing (PTU); our hiring guide explains the exposure (see also contractor misclassification). If this describes your contractor, use a Contractor of Record, which signs the contract with the contractor and takes on the classification work. 4dev acts as Contractor of Record, the contracting party for each contractor, which reduces reclassification risk. If the role is really a job, hire through an EOR: Deel, Remote and Multiplier run Contractor of Record and EOR on one platform, so the person can move over without switching providers.

Rule of thumb. One contractor who already issues CFDIs, paid in pesos: a mid-market transfer service or a percentage-fee platform. A team, or you want documents with every payout: a contractor platform with a document flow. Full-time work for one client: a platform with a Contractor of Record model, or an EOR if it is really employment. Compare the full field in the contractor payouts rating.

Payout rails that work in Mexico in 2026

SPEI itself is Banco de México’s interbank system: it runs 24 hours a day, 365 days a year, moves pesos only and needs the recipient’s 18-digit CLABE (banamex.com, checked 2026-09-28). A foreign bank cannot send SPEI directly; providers that deliver pesos by SPEI pay out from a Mexican account.

What the contractor needs to get paid

The contractor is a persona física registered with SAT, holding an RFC. Most freelancers choose between two regimes:

• RESICO (Régimen Simplificado de Confianza): monthly tax on receipts actually collected, with no deductions, from 1% up to MXN 25,000 a month to 2.5% in the top bracket. It is open only while annual income stays at or below MXN 3,500,000; partners or shareholders of companies and some others cannot use it (LISR Art. 113-E, checked 2026-09-28).
• Business and professional activities (actividad empresarial y profesional): progressive rates up to 35%, with deductions (PwC Tax Summaries, reviewed 2026-08-06).

For every payment the contractor issues a CFDI. To a foreign client it carries the generic RFC XEXX010101000, tax regime 616 and CFDI use S01, plus the client’s country of tax residence and foreign tax ID (Anexo 20 filling guide, checked 2026-09-28). Issuing a CFDI needs an active RFC and the SAT password or e.firma; SAT’s own portal issues them free (pluxee.mx, 2026-07-14, checked 2026-09-28).

IVA. Article 29 of the VAT law applies 0% to services used abroad by a non-resident, for a closed list: technical assistance, advertising, commissions, call centres and IT services such as software and application development, data processing and storage, and hosting (sat.gob.mx, checked 2026-09-28). Services outside the list carry the general 16% even when the client is abroad (Kreston BSG, checked 2026-09-28).

The contractor also needs a Mexican bank account with a CLABE. Classification, PTU exposure and IP terms are covered in our hiring guide.

Documents and tax on the payer’s side

Withholding. A foreign company without an establishment in Mexico does not withhold; the contractor calculates and pays their own monthly tax (siemprecontable.net, 2026-09-21, checked 2026-09-28). The 1.25% withholding on RESICO contractors is an obligation of Mexican legal entities (LISR Art. 113-J, checked 2026-09-28); if you pay through a Mexican subsidiary, it applies.

US payers. Collect Form W-8BEN. Personal service income is sourced where the work is done (irs.gov, checked 2026-09-28), so work performed in Mexico is foreign-source and needs no Form 1099-NEC. The US–Mexico treaty matters only if the contractor works in the US: under Article 14, their independent-services income stays taxable only in Mexico unless they have a fixed base in the US or spend more than 183 days there in a 12-month period (irs.gov, checked 2026-09-28). The 1% US excise tax on remittances that started on 1 January 2026 applies to transfers funded with cash, money orders or cashier’s checks, not to transfers from a bank account (RSM, checked 2026-09-28).

What to keep on file:

• the services contract, with the contractor’s RFC, scope, currency and whether fees include IVA;
• the contractor’s CFDI for each payment, as XML and PDF;
• payment confirmations showing the amount and exchange rate;
• evidence of delivery (accepted work, reports);
• the W-8BEN, if you are a US payer.

On a platform or Contractor of Record model, you keep the platform’s invoice, and the platform holds the contract and CFDIs from the contractor.

Where it breaks

• The contractor’s bank is off-limits. FinCEN orders in force since 20 October 2025 bar US financial institutions from transmittals involving CIBanco, Intercam and Vector Casa de Bolsa (Miller & Chevalier, checked 2026-09-28). CIBanco lost its licence and went into liquidation in October 2025 (El Financiero, checked 2026-09-28). Wise also skips BanCoppel, Banco Azteca and Caja Popular de México. Check the CLABE’s bank before the first payout; the first three digits identify it.
• Fewer pesos arrive than expected. A USD wire to a peso account pays a receiving fee (USD 30 plus IVA at BBVA México) and the bank’s conversion, plus any intermediary charges on SHA or BEN wires. Agree in the contract who bears them, or pay through a provider that delivers pesos by SPEI.
• An IVA line appears on the invoice. If the work is not on the Article 29 list, the CFDI carries 16% IVA. Settle in the contract whether the agreed fee includes it, before the first invoice arrives.
• The 0% rate lacks its paper trail. Wise pays pesos from its own Mexican bank account (wise.com, checked 2026-09-28), so the contractor’s statement shows a domestic SPEI transfer, while the VAT regulation points to payment from foreign accounts as evidence that the service was used abroad. The contractor should keep your contract and the provider’s payment confirmation naming you as payer.
• No RFC, no CFDI. A contractor who is not registered with SAT cannot issue a CFDI, and the engagement leaves no record on their side. Ask for the RFC before signing and a CFDI with every payment.