New 2014 Tax Laws for Mexico that Affect Expats and Foreigners

Dec. 14 (update), 2013
Here’s a summary of the changes in Mexican tax laws affecting foreigners for 2014.    This report comes from Lic. Spencer McMullen, a fine attorney in Jalisco,  who specializes in legal issues affecting expats.   You can contact Lic. McMullen at Chapala Law.

For CURRENT details, see our master article on taxes at: IRS Tax Issues for Americans Living and Working Abroad in Mexico – Master Article

On 11/29/2013 Lic. McMullen reports:
“Very extensive reforms have been made to Mexico´s tax laws and have been finalized in November, 2013. These become effective on January 1, 2014, which does not give people or businesses a lot of time to prepare. This short lead time may cause problems for some people. First, all the appointment times at our local SAT offices in Jalisco (SAT = Mexico’s tax department) are filled for quite a while, and second, some of the changes affect banks and businesses quite a bit. I think it’s going to be a messy transition as many will be unable to comply in time with only 2 weeks left until the government goes on vacation and returns January 2nd when the new laws take effect and even then there may be delays of weeks for people to be able to get appointments at the tax office to set themselves up or make changes.

There are new IVA sales taxes.
It’s now going be 16% nationally (whereas it’s been about 11% in the border areas), and it will include taxes on soda, chewing gum, and   pet food   throughout Mexico.   Those weren’t included in the past.   So,  people with pets should stock up at Costco before the new year.     Dog shelters will be especially hard hit.     For people driving back from up north after Christmas, or coming back from nationalizing their vehicles at the border, they’ll want to fill up their tanks near the border,   where the gas tax will still be 11% until the end of the year.

Will anything change at customs (Aduana)?
Yes, temporary importation of certain goods will also start being taxed. That could open the door in the future for a tax on the temporary importation of vehicles. Not yet, though.

The mandatory use of customs agents for any value of goods to be imported has been eliminated. The use of an agent will be optional, which is a good thing because they’ll have to be more competitive in terms of rates and quality of service.

Also, customs is going to be checking the value of imported goods more closely and communicating with the countries where merchandise is leaving, to check declared values. People may be more likely to get caught if their car nationalization pedimento say the car is worth just $10,000 pesos, while it clearly is worth much more.

What about new banking regulations?
Starting in 2007, there had been a tax on large cash deposits: 2% on the amounts of deposits exceeding $15,000 pesos, which was increased in 2010 to 3% on amounts exceeding 15,000 pesos.

Those taxes have now been eliminated.
But … banks are now required to report to SAT any deposits over $15,000 pesos, and any payment of credit card debt of $20,000 pesos made at a time. SAT may also audit you and compare your credit card expenditures to your declared income. They can then contact you to explain these transactions within a certain time frame. If you don’t respond within that time frame (say, 20 days), they could establish liens and levies. And, of course, you wouldn’t respond if the address they have for you is old.

All of this means that it is very important for people to make sure their bank has up-to-date home addresses and email addresses. This is especially true for snowbirds. It also means that snowbirds will need to check their email frequently while they’re out of Mexico.

Also, banks will require people to have an RFC (tax ID number) in order to open a bank account. They have enabled the ability to get an RFC number online, but people first need a CURP number which has to be processed through immigration (INM). (Editor’s note: If you already have Residente Temporal or Residente Permanente, you MAY have been issued a CURP number. ~ ” Lic. McMullin reports:  “Many who have temporal and permanent documents do not have CURP numbers, at times immigration issued them automatically and at times not, to be sure please check at http://consultas.curp.gob.mx/CurpSP/ and if you have no record then you have no CURP number.”)

With offices closing for several weeks for the holidays, people may have problems in getting CURPs in January and may have to wait until February to open the account.

Anything new for businesses?
Yes, the current process for small business reporting (REPECO) will be eliminated. Currently, small businesses report their gross earnings every two months. For January, that will still be the case in order to report earnings for the November – December months. After that, there will be more paperwork. The process will come through the regular tax system. This means that earnings will need to be reported, and so will deductions, and facturas (invoices) – just like big businesses do today.

As before, the tax rates continue to fall between 2% and 35%. Note that there will be more paperwork, requiring a greater mastery of Spanish. My office will help people by getting them set up and familiar with the new system.

Another change is the elimination of the business IETU tax (single-rate flat tax started in 2007).    Non-profits will start being required to be authorized by the SAT to receive donations,     which would allow them to continue preferential tax treatment.    That’s obviously going to be critical for them.    They should probably start that process immediately, and try to get their major contributors to donate before January 1st.

New Electronic Factura Requirements:
The most controversial of the new business regulations is probably the requirement for electronic facturas and the elimination of paper facturas . The new rules also require giving all employees online facturas (CFDI) rather than paper facturas when they get paid, in order to be able to deduct their wages. That system may not be ready by January 1st, by either the SAT or the businesses, so that’s going to create a lot of problems.

What about tax changes for investors and real estate owners?
Mexico has caught up to many other countries and will tax capital gains on the sale of stock at a rate of 10% as well as tax dividends at the same rate of 10%.

For real estate sales there will be a maximum capital gains tax exemption pegged using the UDI index (investment units) with a new limit of 700,000 which equates to about 3,500,000 pesos so any gains over that amount from a sale will be taxed, the prior limit was 1,500,000 UDIs with that exemption waived if someone could prove they lived in the home for the preceding 5 year period.

That’s a lot of changes.
There are more… (The changes listed above) are just the ones that I think will affect expats the most. SAT is also firming up the tax code in other ways. They did some research to determine where and why they lost tax court cases in the past, and have now plugged some of the advantages taxpayers had in court. I’ll know more next week (1st week of December), so I can give you an update then when I go to another 5 hour tax update class.” http://www.chapala.com/wwwboard/webboard.html

* * * *
Feel free to copy while giving proper attribution: YucaLandia/Surviving Yucatan.
© Steven M. Fry

Read-on MacDuff . . .

125 Responses to New 2014 Tax Laws for Mexico that Affect Expats and Foreigners

  1. Thank you Lic. Spencer, very helpful.

  2. Donald says:

    I previously heard talk of taxing R. E. purchases at 16%. Does anyone know if this has been enacted?

  3. Michael Cadue says:

    There was talk about doing away with Fidacomisos. Anyone know about this?

    • yucalandia says:

      I understand that it has not passed the Senate. It then would need passage by the States.

    • Lic. Spencer Richard McMullen says:

      Even if they do eliminate the mandatory use of fideicomisos in the restricted zone you still need to evaluate the use of one as an estate planning tool, there are times where it can be quicker and cheaper to change owners in a fideicomiso then with plain fee simple ownership but it depends on your goals and gross asset value

  4. Cintia says:

    Muchas gracias por explicar esto de manera concisa y clara.

  5. Daphne Armstron says:

    So…..regarding the real estate….”For real estate sales there will be a maximum capital gains tax exemption pegged using the UDI index (investment units) with a new limit of 700,000 which equates to about 3,500,000 pesos so any gains over that amount from a sale will be taxed, the prior limit was 1,500,000 UDIs with that exemption waived if someone could prove they lived in the home for the preceding 5 year period.” Does this 5 year exemption still apply……????

    • Lic. Spencer Richard McMullen says:

      No the 5 year exemption does not apply anymore but there may be other ways to limit your exposure and raise your basis

  6. Linda from Canada says:

    Am I correct in thinking that none of this really impacts the average retiree living in Mexico, who does not have any income here in Mexico?

    • yucalandia says:

      Hi Linda,
      No more 3% tax on cash deposits to bank accounts. 16% tax on pet food, on snacks, on soda pop may affect some Canadians living here. Canadians who want to bring things into Mexico might appreciate not paying a custom’s broker?
      steve

    • Lic. Spencer Richard McMullen says:

      The average retiree will be affected by having to have an RFC number and also a CURP prior to open a bank account, also if they do a small remodeling job and their source of funds is to withdraw from their ATM to tap their account back home and deposit into a Mexican bank account they can innocently flag themselves for an audit and trouble down the road for example.

  7. Karolyn McCall says:

    Very interesting. Thank You. Please send updates if possible.

  8. Bob Stewart says:

    I am wondering how this affects those who already have a bank account in Mexico and do not have a tax ID number ?

    • yucalandia says:

      Hi Bob,
      In the past, some banks filed RFC numbers for foreigners based on the foreigner’s applications for the account. Check your bank statement, or ask your bank ~ there may already be an RFC listed on it.
      steve

      • Bob Stewart says:

        By golly your right, there is an RFC number on my statement and I didn’t even know I had one !

      • yucalandia says:

        Bob,
        A good Mexican attorney, Lic. Spencer McMullen, offers a different perspective on the validity of bank RFCs from the past:
        No, Mexican banks fabricated an RFC number but it is not official so you should still apply for one and even people who have existing accounts are likely to be asked to get an RFC number in the future, as you can get one online you can probably wait but make sure you have a CURP number. Only SAT can issue official RFC numbers so unless you went personally to a SAT office or did it online your RFC number is one a bank generated and is not official and you will have no official proof of one like you get at the SAT office or if you generate one online on the SAT website.
        steve

      • playaright says:

        Hello Steve,

        Do you know if the CURP’s expire with your migratory document? I had my FM3 for 4 years, but it expired on the day the law changed and much hoopla, I wasn’t able to get a new doc. So now I am in the process of getting a Res. Perm visa here in Canada- not going well… ,anyway, I was excited to see the with a CURP you can get your RFC number online- nope- tried, but both mine and my husbands are ‘invalid’. Do you know about this? Gracias,
        Nanc

      • yucalandia says:

        playaright,
        We don’t know why the SAT website would not work to allow you to get an RFC. I believe foreigners must have a valid current visa to apply for an RFC. That may be why the SAT website did not allow you to register and get an RFC.
        steve

  9. Andrew Tyrer says:

    I guess I might be little dense, but I didn’t think you answered Linda’s question. As I understand it, her question related to income received from abroad (pensions and suchlike). Do you know whether SAT has plans to tax such receipts?

    • yucalandia says:

      Hi Andrew,
      As long as you are not a Mexican citizen, then the short answer is: The taxes on income from your home country are owed in your home country.
      steve

    • Lic. Spencer Richard McMullen says:

      Alot will depend on where the person´s tax home is as well as if they have taken a non resident status in their prior country. Worst case scenario they may have to declare their income in two jurisdictions and then use the provision in tax treaties to get credit for taxes paid in the other jurisdiction

  10. Dwight says:

    Hello. Thanks for this article. Does this effect the importation of a Canadian vehicle at all? In two years I will be going from a Temporal to a Permenante (spelling?), and I definitely want to keep my old 93 Jeep here. Will this effect the tax that I will need to pay on it at time of importation? Also, off topic, but have you heard of an changes to the vehicle importation requirements as it affects those in my situation that will not longer be allowed to have a vehicle here from outside of the country? Going all the way back to the MX border just seems crazy!

    Thanks.

    • yucalandia says:

      Hi Dwight,
      For expats living in the interior of Mexico, things stay the same on vehicle import taxes. The changes only raise the previously lower tax rates paid by people in the frontier/border/Free Zones. The 2014 changes raise those previously lower border-zone tax rates to match the rest of Mexico. (to the best of our understanding),
      steve

  11. Dwight says:

    Thank you very much.

    Do you or anyone else know of a method of importing a vehicle WITHOUT having to go back to the border?

    • yucalandia says:

      Hi Dwight,
      There are various private agents who claim to offer paper-only vehicle imports, for about $2000 – $2,500 USD per vehicle (more than the charges at the US border). “Sonia Diaz” on Mexconnect.com is one example of an agent who guarantees a valid pedimento and the ability to register the car with your Mexican state’s DMV, or your money back. We offer no confirmation of whether this will continue to work or not.

      ~~~~~~~~~~~~~~~~~
      ” SMAcoolist: Mon Dec 9, 2013 7:36 am (PST) . Posted by: soniangel32
      This week we received several pedimentos and facturas of cars we nationalized from as far away as Ixtapa and Manzanillo. All were done without the cars leaving their property and no driving to the border.

      Please note if you want to nationalize a non-NAFTA vehicle this is the last week to do so as after this week the cost will likely rule out doing so. A non-NAFTA vehicle is one made outside of North America and the VIN starts with a letter.

      Some pedimentos are slow and others are coming in 3 weeks. Hopefully, in the future they will all be faster.

      Happy Holidays
      Sonia

      SONIANGEL32 AT hotmail.com
      cell: 044-415-106- 1499 ”
      ~~~~~~~~~~~~~~~~~
      ???
      steve

  12. Carol B says:

    Can you please explain a UDI (investment unit) and how you calculate this as it relates to capital gains?

    • Lic. Spencer Richard McMullen says:

      UDI is an index and raises slightly every month to factor in inflation, maximum amount excluded is 700,000 UDIS, today it is 5.05 so 700,000 x 5.05 means today your maximum amount to exempt from capital gains is 3,535,000

  13. Dwight says:

    Hello Jack. What year and model was the jeep and what did it cost you?

    Thanks.

  14. Lic. Spencer Richard McMullen says:

    As far as the comment ” (Editor’s note: If you already have Residente Temporal or Residente Permanente, you have been issued a CURP number.) ” Many who have temporal and permanent documents do not have CURP numbers, at times immigration issued them automatically and at times not, to be sure please check at http://consultas.curp.gob.mx/CurpSP/ and if you have no record then you have no CURP number

    • yucalandia says:

      Hi Spencer,
      Good update. Every RT or RP we have seen issued here in Merida have had CURPs. Our INM office has issued CURPs with every residency permit we know of since the May 2010 changes. e.g. I had a CURP issued by the Yucatan Registro Civil – for that period back in 2007(?) when we were required to have a CURP to be able to start a cell phone account. Ironically, INM ignored that previous CURP, and issued me another one in 2010.

      Apparently, issuing a CURP with each residency permit has not been a nationwide policy. I edited the article above to reflect your additional insights.
      steve

  15. Al says:

    Thanks for the informative post.
    My question is in regards to my vehicle, a US built Toyota of older vintage.
    I have been an FM 3 since 2010, then transitioned to Residential Temporal in 2012.
    I am under the ‘impression’ that in 2014 I will be able to transition to a permanente status.
    When this occurs, do I need to nationalize my vehicle ?
    Utilizing Sonia’s services are a valid option, thanks for the info.

    • yucalandia says:

      Hi Al,
      If you received your FM3 in 2010, then your Residente Temporal should expire in 2014 – and you qualify for Residente Permanente. You will need to either nationalize your vehicle or take it out of Mexico.

      Since Aduana policy on permanent car imports have changed 3 times in major ways this year, NO ONE can say what Aduana policy will be in 2014. It is very possible (likely?) that Sonia Diaz’s process will not be guaranteed to still be working at the end of 2014 when you plan to become Residente Permanente. We just don’t know. Maybe yes, … maybe no.
      steve

  16. Al says:

    Steve
    Thanks for your response.
    I have one more question regarding capital gains tax on owned property in
    Mexico.?
    “For real estate sales there will be a maximum capital gains tax exemption pegged using the UDI index (investment units) with a new limit of 700,000 which equates to about 3,500,000 pesos so any gains over that amount from a sale will be taxed, the prior limit was 1,500,000 UDIs with that exemption waived if someone could prove they lived in the home for the preceding 5 year period.”
    I was informed back in 2010 when I purchased my Casa, that my exposure to capital gains on sale of property when I reach Residente Permanente would be significantly less, due to achieving that status ? Is that correct ?
    Thanks one more time.

    • yucalandia says:

      Hi Al,
      Mexican attorneys have told us that it depends on if the Notario (who handles the sale) accepts Residente Permanente status as qualifying for the Homowners Exemption. Since the Notario is personally fiscally responsible for paying any taxes if SAT/Hacienda later decides that you did not qualify.
      steve

  17. Cheryl says:

    Hi there:
    Someone said that purchases over $2000 pesos will require the vendor to issue a factura to the buyer with the buyer’s RFC. Is this true? As in CostCo would give me a factura?

    • yucalandia says:

      Hi Cheryl,
      Have you read our past report on this? Cash No Longer Valid for Purchases with Facturas in Mexico over $2,000 Pesos http://yucalandia.com/2013/12/15/cash-no-longer-valid-for-purchases-in-mexico-over-2000-pesos/

      As our little report says: We need to use checks, credit cards, debit cards, or bank transfers for any factura purchase over $2,000 pesos. ALL of those methods of paying require that you have a valid RFC – so, yes, by default, whenever you require a factura and buy something over $2,000 pesos in 2014, SAT will be notified of the purchase that used your RFC.

      SAT then tracks your facturas and crosschecks your future claimed expenses versus those 2014 facturas recorded in the SAT database.
      steve

  18. Gary says:

    “Banks are now required to report to SAT any deposits over $15,000 pesos” Does that include check deposits from one Mexican Bank written to an account in another?

  19. Gary says:

    Thank you for your response. Is this reporting to SAT per deposit of 15,000 pesos per incident, per day or month? Please advise

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  21. Garry says:

    Does the Is reporting to SAT per bank deposit of $15,000 pesos apply to wire transfers as well?

    We have a Mexican bank account (set up since 2006) whose only source of deposits is money from our investments wired from Canada each month.

    • yucalandia says:

      Hi Garry,
      There is no tax charged on bank-to-bank wire transfers, (because the money is in-the-system => taxes paid), but I understand that the banks report deposits/transfers larger than $15,000 pesos as an effort to track/prevent money-laundering.
      steve

  22. Julie Leggatt says:

    My accountant here in Oaxaca tells me that condo associations registered as non profit SA de CV will now have to inform SAT of income and expenses on a monthly basis and pay tax on the difference. This might pose problems for associations that collect all of their condo fees in say January as opposed to monthly. The costs to foreign owners of having to wire condo fees on a monthly basis from wherever they live make that option unworkable. Do you any have info re this possibility and how non profit associations might handle it to avoid tax?
    Thank you,
    Julie

    • yucalandia says:

      Hi Julie,
      Your question is beyond our expertise. The best advice we can offer is to suggest you work through it with your accountant. All businesses require some sort of cash reserves to operate, so one would think that the Mexican Govt. has included some provision for businesses to accumulate cash without paying taxes on it during the month that the credit is booked. ???
      steve

    • Norma says:

      Hi Julie, Norma here in Great White North…..Hope you’re well. Do send me an e-mail if you receive this…..
      Hope you’re enjoying Oaxaca (moved from Puerto Escondido?)…

  23. Julie Leggatt says:

    Thanks Steve. Will keep you posted as we work this one through.
    Julie

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  25. ulisesmoreno808@gmail.com says:

    Hello, I have a question about MX national, lives in mexico full times, kids in school, home, everything. But own a company in US. All money earned is from the US and is transferred to Mexico 2 times a month. Based on the Residence rules could we be Non-resident for Mexican tax purposes? We do not meet the resident requirement, for taxes:

    • When more than 50 percent of the individual’s total income received during the calendar year is derived from Mexican sources. ( non or our incomes is derived from mexico)

    • When the individual’s main center of professional activities is located in Mexico.
    (Our business has leased office space up north. not in mexico)

  26. Did this pass?: “No deduction would be
    allowed for related party
    payments abroad that are
    subject to an effective tax
    rate that is less than 75% of
    the Mexican corporate
    income tax rate.”

    • yucalandia says:

      Yes, as described above, the new taxes took effect on Jan. 1, 2014.

      We get very few inquiries about corporate tax rules, so we’ll default to KPMG’s advice on related party payments:
      Limited deductions for related-party payments

      Under the new legislation, payments made to a foreign company that controls or is controlled by the taxpayer will not be deductible when these payments are made with respect to interest, royalties or technical assistance, and when the foreign company that receives said payments is considered to be “transparent” and its participants do not pay tax on this income.

      “Control” is defined with reference to parties that have direct or indirect influence to decide when dividends are paid.

      Also, payments that are considered as “non-existent” by the payment recipient or payments not considered to be taxable income by a foreign entity also will not be deductible.

      Non-deductible expenses also include payments that are made by a resident in Mexico and that, in turn, are deducted by a related-party resident or nonresident in Mexico. This restriction does not apply when the related party that deducts the payment made by the taxpayer accrues income earned by the taxpayer in the same tax year or the next tax year.

      https://www.kpmg.com/us/en/issuesandinsights/articlespublications/taxnewsflash/pages/mexico-tax-reform-affecting-related-party-transactions-maquiladoras.aspx

      How will this affect you? (or us?)
      steve

  27. BajaBarry says:

    Steve – the link to ChapalaLaw is reporting a 404 Not Found which is kind of strange – thought you should know.

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  30. ulisesmoreno808@gmail.com says:

    Does anyone know if this is effecting incoming wires as of now? I have an account that does not have an RFC on it.. and its used to receive payments for work completed in the USA

  31. Debbie Kupitz says:

    I receive alimony from my ex that he takes no tax relief on. It’s paid to me in the UK. If I were to stay beyond 183 days, would I have to pay income tax on this? Or would the double tax treaty be applicable? Also, if I’m a permanent resident my heirs wouldn’t have to pay inheritance tax, is this correct? Is it 5 years as a resident to get this status?

    • yucalandia says:

      Hi Debbie,
      Good questions. I don’t know about the UK-US tax treaty or the UK-Mexico tax treaty, so I can’t comment on how tax things would work for you.

      The Residente Permanente status is an INM type of visa, and it does NOT mean anything about qualifying for “permanent resident” status with the IRS. Foreigners with sufficient monthly (retirement) income or with sufficient savings can get Residente Permanente status, in as little as 30 days from INM, without ever living in Mexico – as long as you have someone who will give you a copy of their power bill for you to use as a Mexican address. Having Residente Permanente INM status does give you the permission to work in Mexico, but it really has ZERO impact on your tax status. e.g. If you sell real estate and realize a gain, then you pay taxes on that gain whether you are a Residente Permanente or Visitor or Residente Temporal. Read more about how to Immigrate to Mexico at: http://yucalandia.com/answers-to-common-questions/new-rules-and-procedures-for-immigration-visiting-and-staying-in-mexico/

  32. Darryl Silva says:

    What is the process to stop paying the HACIENDA tax every 2 months. It is just not worth it to me. I’ll just stop doing business. I was not making any money anyway.

  33. johndewaal says:

    I live in a condominium and pay my fees quarterly. I receive a little handwritten receipt. Is this permissible under Mexican (Jalisco) Condo law? Should I not receive a ‘factura’ as provided by the fraccionamiento in which I also reside?

  34. Paul Roberjot says:

    I am in the process of selling an apartment in GDL which I have lived in as my principal residence for the last 7years. The gain is 1.25m pesos do I have a liability for capital gains tax?

    • yucalandia says:

      Hi Paul,
      Talk with the Notaria who would handle the sale. If you are a Mexican citizen, then you would qualify. In principle, if you have been full time official resident of Mexico (like a Residente Permanente or Inmigrado), then you could qualify for the Homeowner’s Exemption – if the Notaria is willing to authorize the exemption.
      steve

  35. David C says:

    Hi, I’m trying to confirm SAT changes effective Jan 1/14 that relate to Canadians (or Americans) renting property. Apparently IVA tax for renting my property in Mexico must be wired to Mexico to “cover” the amount of tax due (25 percent) on the transaction. The instructions are to deposit into an escrow account, SAT will issue the exception letter to prove to Revenue Canada that tax was paid on the income, exempting payment at home. I have a very official letter on SAT letterhead in English outlining the process. Is this really the case? My difficulty is that the rental funds are in escrow, why deposit an amount that can be deducted from rental funds and remitted to SAT before remitting net rental proceeds to me? Those were the former procedures. SAT has a link to an English document on their site, but for some reason it’ requires a login and password. Thanks for reading, hope you can clarify.
    David

  36. David C says:

    Here’s the SAT link I referenced above.

    http://www.sat.gob.mx/English/Paginas/default.aspx

  37. Andrew says:

    Can anyone “lend” me a sign-in and password?

  38. mariposavega says:

    I am about to relocate to Mexico and my relocation company is having problems with getting a new lease. Our “Intermediators” have suddenly asked that all leases list them as landlords and all money be wired to their account instead of the landlord’s, citing changes in the 2014 tax law. I have been unable to find anything that justifies this and wondered if this is standard process this year.

    • yucalandia says:

      mariposa,
      Landlords are now supposed to provide facturas, and pay either 20% or 25% (?) taxes to SAT. I don’t exactly know what an “intermediator” is or does, but it is possible that if the “intermediator” becomes the legal landlord of record, then they become responsible for any taxes. Maybe they are doing some tax dodge, where they show that they are renting to themselves – avoiding the new taxes.
      ???

      Where are you located?
      steve

  39. Lois says:

    hello, could someone please tell me what all these abbreviations mean….CURP, RFC, SAT
    thanks so much

    • yucalandia says:

      SAT is the Mexican Govt. organization that oversees tax collections, making it very much like the US IRS.

      RFC is the ID number that SAT issues to individuals and businesses, as their account number for taxes.

      CURP is the general ID number issued to Mexicans by the Mexican Govt. to track people’s records with the Mexican govt. pension system, to track people’s records with the public health systems, to track people’s (children’s) records for going to school, etc. One cannot use the govt. (public) medical, pension, or school system without a CURP. INM issues CURPs to foreigners.
      steve

  40. Nancy says:

    My husband and I are in the process of purcashing a home in Merida, and are being asked by our notary and seller to put the Castral appraised value on the deed not the sale price. We are told thus is standard practice and everyone does it and we will have a hard time trying to find someone to buy from who won’t require thus. We were also told that we could get credit for renovation costs as we are foreigners. Is this correct and is the castral vs sale price widely practiced in Merida?
    Thank you

    • yucalandia says:

      Hi Nancy,
      Catastral values are what they pay taxes on. If the seller is so convinced that the Catastral valor is the actual value of the home, then explain that you would be glad to pay them the Catastral value.

      The “everyone does it” is the same logic that had MEXICANS insisting on reporting very low sales prices when selling their personal home to Gringos. The uneducated (lazy) Notarias and uneducated (lazy) real estate “experts” – “realtors” ignored that these Mexican sellers fully qualified for the homeowner’s exemption to gains taxes – so they were trying to dodge a tax that they did not even owe… (if they knew the law).

      If you have a Mexican seller who qualifies as the owner who lived in the home for the last 5 years, then they can easily report the CORRECT full sales price without paying any additional taxes. Ask the Notaria if you should go to SAT/Hacienda and personally ask whether the Notaria should report the correct legal price to the government, or if they should lie and cheat the government. The Notarias are personally fiscally liable for any tax errors they make.

      Our last 2 sellers personally listed the full price they received on the properties we bought – so, at least in our neighborhood, “everyone is not doing it”.

      It’s all your personal choice.
      steve

  41. Nancy says:

    Hi Steve, thanks for your prompt reply and good advice about finding a Mexican seller if our current deal falls through as we are requesting the sale price from our american seller. What are the taxes for Mexican owners who have abandoned property or vacant lot, as we are looking to do a renovation. Also I made a spelling error in my 1st post, our notary told us that we could Not use our renovation costs to apply against future taxes as we are foreigners, from reading your past responses I think this is incorrect.

    Nancy

    • yucalandia says:

      Hi Nancy,
      You are correct: Improvements that are documented by facturas are legally allowed deductions from the gains.

      Unfortunately, the ultimate decision is up to the Notaria who handles YOUR sale (when you realize a gain on the future sale). Your current Notario has NO authority over what deductions your future Notario uses. If your Notaria would read the latest changes in the Mexican tax code, printed in their Federal Registry (Diario Offical de al Federacion DOF), both the tax laws on gains and on who qualifies have changed since the beginning of the year.

      Unfortunately, Mexican Notarios and Mexican lawyers have NO obligation to bother to stay current on the Mexican laws and the latest changes – and they are often up to 4 years behind in their knowledge. Find a good one for your sales.

      Education requires effort and $$, and there seems to be a shortage of both in parts of the Mexican “professional” legal community.
      Happy Trails,
      steve

  42. Nancy says:

    Hi Steve, you have mentioned above about a special request for an appraisal if you don’t have facturas, does this change your iffical catastral value? Do you have to pay back taxes on the difference if you wait until you sell to do this?
    Nancy

    • yucalandia says:

      Hi Nancy,
      That is exactly the point: Have the government adjust the official value of your property to reflect its current actual value (allowing you to use a higher “basis” value to deduct from the sale price, creating a smaller gain for much lower taxes, without facturas). You would not owe back taxes – just paying taxes (now) based on the fair market value.

      I have no idea when you should request the official re-valuation. That is a question for an expert (tax lawyer or accountant) who knows the details of your situation.
      Happy Trails,
      steve

      • Kaye says:

        Steve, you already know the story about my notario who allowed the recorded purchase price of my property to be recorded far lower than the sales contract he had access to. He told me he relies on what he is told by the real estate company. Really?? If he is liable for discrepancies, why would he not ask for verification from them, like say, maybe a copy of the sales contract?? I surmise that is because, as they say…”It’s always been done that way.” And, by the way…all this was done in the presence of one of the vice presidents of HSBC in attendance at the closing. ;) I have contacted both him and the notario to resolve this with no results.

        All that aside, since I have been pursuing resolution of that error with him since 2007 with no results, who would I contact to have my property re-appraised (official re-evaluation) so that I can alleviate some of the difference between the very low recorded price and the actual sales price I paid? I know it will result in higher taxes paid, but I am fine with that and just hoping no back taxes would apply. Also..can you roughly translate the amount into dollars that capital gains would be exempt on…and does that only apply if I am permanente or living in Mexico full time?

        As a side issue, who would I contact to do a survey…apparently there is also an error in my fideicomiso which Catastro discovered, related to the legal description. Whoever typed it, recorded two different measurements in two different places…he also told me he would resolve that…but nothing from him on that either. Do your homework, people…I also have no facturas for the major improvements done on my house over the years, even though I paid seguro social on those who did the work. Sigh…and, in case anyone is wondering…I, at no time agreed to do anything under the table in regards to the sale and told them I wanted everything done according to law…to have paid the additional amt due on the real purchase price would have been a pittance to what I will now have to pay if I were to sell with no change in value..

        Do you have any recourse here in Mexico against notarios who are incompetent?

      • yucalandia says:

        Hi Kaye,
        Very good questions. Here in Merida you go to the Catastral office to get your property re-appraised. We just finished remodeling a place, and will have it re-appraised to be able to sell it with a higher basis value (owing less taxes).

        Actions with incompetent Notarios? You could start by filing a complaint with PROFECO http://www.profeco.gob.mx/formas/f_3i_quejas.htm . I have no idea if it’s worth hiring a lawyer to file a legal action against the Notario. Notarios are responsible directly to the government, so their oversight agency could assist you. Yucatan has a Consejo de Notarios (Board of Notarios), and their contact information is in this pdf file (see Yucatan) http://www.notarios.com.mx/admin/fotos/docs/COLEGIOS%20DE%20NOTARIOS%20DE%20MEXICO.pdf .

        Legal actions here in Mexico can take years (4 – 6 years is often typical) – with ongoing costs. I have no idea of the likelihood of success. I believe that beyond filing with PROFECO, you then need to contact a lawyer.

        I’m waiting to hear from my sister-in-law architect/general contractor on the surveyor. I suspect that the original surveyor can make changes in his report, but I don’t know if a different later surveyor can make changes to the legal description of the property.
        steve
        steve

  43. Al says:

    I have just been informed, while back up north, that the rule penalizing larger deposits has changed…
    I am told that one can now deposit up to 3K in USD without penalty ?
    Can you please confirm.
    THX

  44. Kathy Rodgers says:

    What about tax free private club if they are 100 o/o non profit are they required to pay IVA?

  45. David Letts says:

    How do I register with SAT and obtain an RFC number? Living in the Lake Chapala area, I understand I must go to Guadalajara — what address? What documents are required, at what cost? Thank you.

    • yucalandia says:

      Hi David,
      If you have your CURP, it is easiest to get your RFC assigned online: https://siat.sat.gob.mx/PTSC/inscurp/

      If you don’t have a CURP, until we hear from someone from the Guadalajara area, I can only advise you based on what Spencer McMullen has written. the SAT office there (like our Merida office) has only so many appointments open every month, and those appointment slots can fill up fast, so you have to figure-out what time of month to apply, or go in on a “walk-in” basis, sit in the chairs, and wait for an opening. If the RFC is for working, our SAT had a series of questions about the employer, the type of work, etc. I had to have a letter from my employer on company letterhead describing the job. RFCs for operating a business has different, and is beyond our ken – and can be tied to ISR rules. Advice in this area is best gotten from a good accountant or good attorney like Lic. Spencer McMullin in the Chapala area: chapalalaw.com.

      I hope this cursory information helps you get started,
      steve

      • J says:

        The above link to SAT concerning RFC # assignment does not work. Might you direct me to another link? Thank you.

      • yucalandia says:

        Hi J,
        I can’t find any SAT RFC links listed above. There is a consult your CURP link, and that one works.

        Can you cut and paste a copy of the broken link down here into the comments, please? (and I’ll fix it)
        steve

  46. Jennie Schardt says:

    Hi David –

    I am a US citizen and I have a time share for sale in Las Vegas. Supposedly an agent in California has a buyer in Mexico, but in order to proceed I have to send SAT 15% of the selling price BEFORE we can proceed. Supposedly the money for the sale has already been put in a bank escrow account in Mexico. This all sounds like a possible scam, but I figure if I can at least verify the SAT tax law it would be a good start.

    Thank you!

    • yucalandia says:

      Hi Jennie,
      Since Notarios must withhold taxes from sales proceeds, what they are telling you could be completely correct. I would contact a talented licensed professional for legitimate advice, like Lic. Spencer McMullen at Chapalalaw.com. Spencer has years of a fine reputation for giving solid legal advice and aid to us foreigners – and charges very reasonable fees for his excellent services.

      (Tell him steve of Yucalandia says “hello”.)
      Happy Trails,
      steve

  47. Mark Stevens says:

    So now that I need a CURP to renew the registration on my (Mexican-plated) car and can only get a CURP with Residente Temporal or Residente Permanente status, things are going to be interesting come renewal time. I can spend a week or two at a time in Mexico, but I can’t really spend long enough to get a residency status. It’ll also be interesting for foreigners wishing to sell or buy real estate when they need a CURP and RFC but aren’t able to get them because they don’t have a residency status.

    • Theresa Noble says:

      Hi, this is my question exactly! I used have an FM3, I own property in San Miguel de Allende, then had to move back to US so let my FM3 expire. Then the law changed. Now I would like to sell the property. Am I able to get the necessary CURP and RFC even though I will return to Mexico on a tourist visa? Also, I have given a Mexican friend power of attorney over my property…will this change the necessity for me to have a CURP and a RFC in order to sell? Thank you, Theresa

      • yucalandia says:

        Hi Theresa,
        Interesting situation.

        Formally, in the past, one had to go in person to apply for an RFC, (which meant SAT/Hacienda required that the foreigner notify INM and also tell Hacienda their current INM permit number), but now, foreigners can use their old CURPs to get an RFC number over the internet – from the SAT website.

        Do you still have your CURP from your old FM3? INM used to print the CURP in the booklet, and then later, INM printed them on the FM3/No Inmigrante cards.

        Really this is a question for a good attorney, but on the practical side, if you use your previously issued CURP, now, to apply online for an RFC, then, if the SAT/Hacienda website issues you an RFC, you would then have your CURP (from your prior FM3) and an RFC. If this works, be SURE to check with the Notario who handles the deal that he accepts your prior CURP and current RFC as sufficient documentation for the sale.
        ???
        steve

      • Theresa Noble says:

        That would be great if that works…I was told by immigration at Tijuana border last time I entered Mexico that I would have a big fine since I never cancelled the fm3, just let it expire…any thoughts on that? Thank you so much for your help!…also, on another site I read that someone with no residency status in Mexico would have to go to a US Mexican consulate to get a RT (?), then in Mexico get the RFC…any comment on that?

        >

      • yucalandia says:

        Hi Theresa,
        No, there’s no penalty for allowing an FM3 to expire. To get the current equivalent visa, a Residente Temporal (RT), you’d need to apply at a Mexican Consulate in the USA, and come to Mexico to finish the process. Once you have the RT, it’s easy to get an RFC.

        You can read all about those requirements at our main article on immigration and visiting Mexico at: http://yucalandia.com/answers-to-common-questions/new-rules-and-procedures-for-immigration-visiting-and-staying-in-mexico/

        Happy Trails,
        steve

  48. julie says:

    does a person need to pay a I.R.S. mexican tax when they sell a timeshare in Mexico toward the SAT?

    • yucalandia says:

      Hi Julie,
      If the timeshare is sold at a profit, I would think yes, you would pay taxes under the ISR, but I am NOT an expert. Contact the timeshare company to find out what taxes are owed, as their Notario who processes the transaction would be responsible for automatically with-holding any taxes you would owe. Under the upcoming rules, you may have to have an RFC after Sept.1, 2014.
      steve

  49. Cindy Fisk says:

    How are foreigners going to purchase condos, homes etc for vacation use, if they have to live here 6 months to do it? Is Mexico wanting to stop foreign
    buying? To obtain a curp, you need to ho to immigration and say yes, I plan to stay in mexico 6 months, correct?
    My friends condo sale just fell through, because of this new law, it makes no sense.

    • yucalandia says:

      Hi Cindy,
      Fortunately, there’s no truth to that “6 month” rumor.

      Unlike the USA’s restrictive rules on how long foreign residents must be in the USA every year, Mexico has no such requirement.

      You wrote: “My friends condo sale just fell through, because of this new law, it makes no sense.

      Since the law takes effect on Sept. 1, it doesn’t make sense that a future change ruined a current sale – before the law takes effect. Does your friend live in a state that had a similar rule already in effect for the past year?

      Considering our responsibility to follow laws and pay taxes: Since the Mexican government requires taxes be paid on these sales, is it so unreasonable that the government requires that the person be registered to pay taxes?

      Should undocumented aliens (who choose to not register and choose to not get the personal documents to pay taxes) be buying and selling properties – dodging the taxes the rest of us pay, due to their personal choice to not become fully documented?

      Do upset Americans support undocumented Mexican aliens in the USA?
      ???
      steve

  50. Cindy Fisk says:

    Hi Steve and Thank You
    my friend’s condo was supposed to close on Oct. 31, 2014 which is indeed
    after Sept. 1. This is very simple, as when the couple were told that they would need a curp and RFC. They went to immigration and were asked if they plan on being here 6 months per year, and simply said no and they denied them because they were not going to be here longer than a month or so per yr. Right now that seems to be the only way to obtain a curp. Everyone who purchases property here needs to apply for a tax number, I understand what you are saying and certainly agree with paying taxes but nobody thinks this is going to be a problem with foreigners buying vacation places here? Some people cannot put that time in to buy something here.
    I read in a previous mail to Jenny that the notatio did hold back sales tax so he would not be liable, maybe this can help. We need to obtain a curp easier than through immigration, or just use the tax number only as that is what this is about taxes, right.
    Thanks

    • yucalandia says:

      Hi Cindy,
      Have your friends check out our main article on Visiting and Living in Mexico at: http://yucalandia.com/answers-to-common-questions/new-rules-and-procedures-for-immigration-visiting-and-staying-in-mexico/

      In that article you can read the requirements for becoming a legal Residente Temporal (RT) – which includes INM issuing you a CURP. If the applicant does not have any Mexican family members, then they have to go back to their home country and apply for RT at a Mexican Consulate. The Mexican Consulate issues a special visa (a Canje) to return to Mexico and complete the RT process with INM. These processes have been working since Nov. 2012.

      Once they have their RT status – (with NO requirements to be in Mexico for 6 months a year) – they then apply for an RFC either online or at their local SAT/Hacienda office.

      Again, there are no 6 month residency requirements for being either a Residente Temporal nor for Residente Permanente. I would guess that your friends either misunderstood what the INM people told them, or that your friends don’t speak Spanish well, or that an INM person tried to speak in English and gave bad advice.

      Re taxes: Just like in Canada and the USA, the Mexican income taxes owed for gains/profits from selling a property are not the same as the IVA sales tax – so “holding back sales taxes” has nothing to do with paying income taxes.

      If they get their Residente Temporal permit(s), then getting the RFC and selling the property become straightforward.
      steve

  51. Al says:

    I am applying for a RP after the obligatory 4 years of FM 3 and RT
    I have been quoted immigration charges for “analysis and consideration” of application
    Of ~ 2,000 MXP and ~ 4000 MXP for “the card”…….
    In your experience, is this a ‘fair’ assessment ?

    I have been informed, by reading informative articles such as yours
    That I have up to 55 days, post expiration date, to appear in person
    In order to satisfy the RP requirements….as long as the application and fees
    Are presented at time of, or before RT expiration.
    Appreciate your experienced opinion

  52. Al says:

    Steve, as always I depend on your font of knowledge to get me thru the complexity, (seemly more & more every year…) of MX requirements.
    Thanks for sharing your wide base of knowledge with others on your site.
    Al

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  56. Jacki Richey says:

    Thank you, Steve, for the information on how to get an RFC number. My husband and I will need that in order to sell our house here.
    Do I understand that we would have to have Permanent Resident Visas in order to qualify for the capital-gains-tax exemption? Or can we just be eligible for a permanent resident visa? We have temporary resident visas and have lived in this house full-time for over eight years.
    Jacki

    • yucalandia says:

      Hi Jacki,
      The decision of whether you qualify for the homeowners exemption is all up to the Notario who handles your sale.

      Some/many Notarios are granting the exemption to Residente Temporales.
      A few Notarios are only granting the exemption to Residente Permanentes who have Mexican citizenship applications pending. – so it’s a mixed bag out there.

      Find a Notario who will commit to your plan of action, to handle your sale,
      steve

      • Jacki Richey says:

        Steve, I was told that the buyer selects the notario. Our potential buyer is from out-of-town and might accept our suggestion of a notario. He would be getting a mortgage from a bank using his INFONAVIT account for the down payment. In that case will the bank or INFONAVIT insist that we use their notario?

        Thanks,
        Jacki

      • yucalandia says:

        Hi Jacki,
        There is NO LAW and NO Government RULE requiring the buyer/seller to use the buyer’s Notary – it’s just a common custom, that is slowly changing.

        If the buyer chooses to get a loan, the terms of their loan may require use of the Bank’s/lender’s notary – but that is a civil agreement that is the Buyer’s issue – one you can choose to accept or reject (by rejecting the Buyer’s offer).

        The IFONAVIT loan may require use of their Notary – and in a worst case scenario, we know of 2 different home owners whose buyer’s bank Notarios withheld a full 35% taxes on the full purchase price – totally ignoring deductions for the original purchase price etc. The sellers said they had no recourse to recover the losses, once the sale was made.

        For a $200,000 USD property, that could mean paying $70,000 US dollars in taxes – which is enough to cause some sellers to say “No Thank You” to that buyer. ???

        steve

  57. ulisesmoreno808@gmail.com says:

    INFONAVIT will give him a list of approved notarios that he can use. He can not use any notario that is not approve. I just had a sister inlaw buy using INFONAVIT

  58. ulisesmoreno808@gmail.com says:

    Also the banks typically use a single notario. For example Scotia bank in Playa only uses one notario for the whole city

  59. Jimexico says:

    I understood that the seller coud file an annual declaration to show the correct profit and claim a refund – not true?

    • yucalandia says:

      Hi Jim,
      There are so many items in the article above that I can’t tell what you mean by “filing an annual declaration” (of what?) to “claim a refund” (of what>?)

      What is the topic, which rule, what payments?
      steve

  60. Jimexico says:

    Steve
    Most of the previous comments related to sales of real estate with the Notario withholding way too much in taxes.
    My comment was that I understand the withholding is like withholding from wages or an IRA distribution. When you file your annual tax return (declaracion en Mexico) you can show the correct gain and get a refund if overpaid.

    • Jacqueline Richey says:

      Aren’t annual tax returns only filed by people working in Mexico? We are retired and are selling our house in order to leave Mexico. When we sell our house, we will contract with an attorney who is well versed in the tax laws affecting foreigners and who for 1% of the sales price, will work with the attorney in the notario’s office who draws up the escritura and other documents. If the notario’s office does not recognize our right to a tax exemption (due to our living in the house over five years and having permanent resident visas), we will reject the offer.

  61. Jimexico says:

    I’ve been told filing the annual was optional – but not by an expert. I need to find out.

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