MEXICALI – Mexico’s federal government has extended the Zona Libre de la Frontera Norte (Northern Border Free Zone) fiscal incentives through at least 2027, maintaining the preferential tax and wage structure that has shaped Baja California’s economy since the program launched in January 2019. The extension, confirmed by the Secretaría de Hacienda y Credito Publico, keeps the reduced income tax rate of 20% for businesses operating within the 25-kilometer border strip and the reduced IVA (value-added tax) rate of 8% compared to the standard 16% charged in the rest of Mexico.
For workers, the Zona Libre maintains its higher minimum wage floor. As of January 2026, the daily minimum wage in the border free zone is 440.87 pesos (roughly $24 USD at current exchange rates), compared to 278.80 pesos daily in the rest of the country. That gap, approximately 58% higher in the border zone, reflects the higher cost of living driven by proximity to the U.S. economy. The Comisión Nacional de Salarios Minimos (CONASAMI) approved a 5% increase for 2026, though critics including Semanario ZETA have noted that after income tax withholding, the effective gain for most workers is smaller than the headline figure suggests.
The free zone covers all six municipalities of Baja California (Tijuana, Mexicali, Ensenada, Tecate, Rosarito, and San Quintín) plus border municipalities in Sonora, Chihuahua, Coahuila, Nuevo León, and Tamaulipas. For the state’s roughly 200,000 maquiladora workers and tens of thousands of service industry employees, the extension provides continuity after years of speculation that the program might be scaled back or allowed to expire.
The program has also benefited American retirees and expats living in Baja California, who pay the lower 8% IVA on everyday purchases from groceries to restaurant meals. A retired couple in Rosarito or Ensenada effectively saves 8% on most consumer spending compared to what they would pay in mainland Mexico. Business groups including CANACO Tijuana and CANACINTRA Mexicali had lobbied heavily for the extension, arguing that eliminating the incentives would trigger capital flight to U.S. border cities.