Sept. 16, 2017 Update
Taxes and death are the two things most people want to avoid, but here at Yucalandia we suffer from a peculiar malady of grimacing and facing-off with distasteful-but-necessary issues. We recently addressed Death** , so, now it’s time for taxes.
Disclaimers:
~ As with all legal issues, it’s BEST to talk with a talented expert about the details of how to comply with Mexican law, and the information offered on Yucalandia is solely for educational & informational purposes. This is especially true for taxes, because the Mexican ISR is particularly dense, yet the ISR incudes some surprising exemptions & exceptions.
Still, it’s also really helpful to get a sense of the basic principles of our responsibilities, to know when to go see that good tax attorney &/or accountant. That’s the purpose of this short article. In April, 2017, SAT put up a helpful website, in English, describing foreigner’s specific tax responsibilities, and that website is the basis for this article:
“TAX TREATMENT OF FOREIGN RESIDENTS RECEIVING INCOME IN MEXICO”
http://www.sat.gob.mx/english/Paginas/English/tax_treatment_residents_in_mexico.aspx
~ Note that if you are a resident of either Canada or the USA, Mexico has tax treaties with each, and those tax treaties provisions take precedent over Hacienda~SAT’s ISR rules.
For USA-nians, Yucalandia offers detailed analyses of our responsibilities both in the USA & Mexico under the 1993 USA Mexico Tax Convention at:
IRS Tax Issues for Americans Living and Working Abroad in Mexico – Master Article
“WHO ARE CONSIDERED RESIDENTS IN MEXICO
Tax legislation considers residents in Mexico the following persons:
- To individuals, nationals and foreigners, who have their residence address in Mexico. When they also have a living place in another country they are considered to be resident in Mexico, if they are in the following cases:
– When more than 50% of their annual income is obtained in Mexico.
– When the center of its professional activities is located in national territory.
- Individuals who are State officials or Mexican national workers, even if the headquarters of their business is abroad.
- Legal entities (companies, associations and civil societies, among others) that have established in Mexico their business headquarters or main offices.
Individuals of Mexican nationality are considered residents of Mexico, unless they prove they have a residence status in another country.
Individuals who according to the foregoing are Mexico´s resident, regardless of being a foreign nationality, are taxed as any national individual resident in Mexico. to know how you should be taxed, you may consult the main tax regimes, if you fall in this category.
Individuals who are residents of Mexico will be taxed according to their activity or corporate purpose in any of the following regimes: “
http://www.sat.gob.mx/english/Paginas/English/residents_in_mexico.aspx
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Mexican Taxes on Foreigner’s Real Estate Income
KISS … Keeping it simple: Foreigners who own real estate & rent it out owe 25% taxes (“without deduction”) on the rental income:
http://www.sat.gob.mx/english/Paginas/English/how_do_foreigners_pay_taxes.aspx
“ Income tax calculation
Tax is paid by applying the rate of 25% on the income obtained, without deduction.
Payment mode
People who make payments, calculate the tax and make the withholding and whole or payment corresponding to the Tax Administration Service (SAT).
When the individual who makes payments is resident abroad, taxpayer who obtains the income must calculate and pay the tax by means of a declaration, which he presents either by Internet or bank teller, within 15 days after obtaining the income.
Obligation to issue an electronic invoice for the income or revenue collected
Tenants must issue electronic invoices for the income received, which must have tax requirements.
When the rent is paid to a trust, the trustee must issue tax receipts and make the withholding and the corresponding amount. ”
Caveat: The good attorney Spencer McMullen also noted that the furnishings of a furnished apartment can trigger the IVA (16.5%), but as this advice was published several years ago, talk with your tax attorney / accountant.
Interest Income for Foreign Residents of Mexico
There are multiple levels of interest rates depending on the source of the income, ranging from 4.9% to 35%. e.g. 21% interest is owed on income “paid by banking institutions“.
“HOW FOREIGN(er) WHO RESIDES IN MEXICO SHOULD BE TAXED
Foreigners who reside and receive income in Mexico must meet the tax obligations imposed on them, like any national, the scheme for which they receive their income.”
This includes income from leasing or subleasing of real estate owned by the foreigner.
Foreigners who own property in Mexico ” are considered nonresidents if their main business location is not in this country, that is to say, if more than 50% of their annual income does not proceed from a wealth source located in Mexico, or if the center of their professional activities is not located in national territory, among other reasons. ”
http://www.sat.gob.mx/english/Paginas/English/residents_abroad.aspx
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**Death & Taxes? Here’s Yucalandia’s offereing on death:
Preparations & Key Actions for Dealing with the Death of a Loved One in Mexico
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Happy Trails
… and …
Keep doing your best to color inside the lines,
steve
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Feel free to copy while giving proper attribution: YucaLandia/Surviving Yucatan.
© Steven M. Fry
Read-on MacDuff . . .
Surviving Yucatan 
What about residing in Mexico LESS than 183 days make you NOT a tax resident? (regardless of whether you have residency visa)
jalpeno,
You’re on the right track. According to the Mexican ISR (tax law) and SAT website, it is NOT the number of days you spend in Mexico, and it is NOT your visa nor your Mexican citizenship status.
~ It’s the % amount of income that you are receiving from Mexican sources or for Mexican activities. ~
If over 50% of your income (without deduction(s) ) comes from Mexican sources or from Mexican activities, then you are a “resident” for tax purposes.
Still, our information is only for educational purposes … plus, the ISR is quite dense, so talk with a good Tax attorney or Tax accountant for the final word on your particular situation.
Happy Trails,
steve
Gracias! thats interesting and good for retirees/expats. Easy to keep most of your assets outside Mexico (just only have the real estate and bank accounts) My MX source income is 0.2% Most countries want to tax you if you live 6 months or more.
Quick question – just opened CiBanco savings account (PRLV) paying 6.5% estimated MXN 10,000 interest income. Will the bank do tax withholding or I have to file return?
Question: With money that is earned by a girl friend and deposited in her bank account. IF she declared 0 (nothing) earned with her RFC on the SAT monthly declaration when she did earn money. Is there any responsibility on the partner. We are not married, but been together for years, live in same house. But its her money and her RFC. I just don’t want any problems from her not being honest with the SAT
Hi Ulises,
Are you reporting her as your concubina with the government?
Has she reported you as her concubino with the government?
If you have not formally registered yourselves as being in a “Union Libre” … or if you are in a Mexican State that has not legally appproved~recognized concubino~union libre relationships, then in either case, you would not seen to be liable for your partner’s taxes.
Still, we are neither lawyers nor tax experts – so consult a competent tax authority.
steve
We are in the process of selling a timeshare in Mexico and have been advised we need to register with SAT so the money can be taken out if the country. It has been stated that the fee is 11% of the selling price payable yo SAT and once paid they stamp invoice and return which then allows proceeds of sale to be taken out if Mexico. Cannot see to find anything on line in English that can confirm this information. Any comments would be appreciated.
Excellent question.
We are NOT lawyers. Our information published in the article above has been checked & verified by good Mexican attorneys, but it is only meant as educational information, not formal legal advice.
In that vein, we understand that the SAT’s ISR law requires that gains taxes be withheld (by the Notario) on any net gains from selling real property. Because the ISR lists different rates of taxation, based on that year’s total income+gains and other factors, we really cannot tell you what exact rate you would have to pay to SAT => 11% ? … 16% ?
Finally, you are legally bound by the decisions of the Notario handling the sale. That is is extent of our knowledge & understandings in these areas . … It really is ALL up to your Notario. … Talk with them (him).
Good Luck,
steve
I have been dealing with a Holdings firm (USA) to sail a timeshare in Mexico. It has been ongoing for one year. More than $46 000USD has been sent (bank wire) to that firm and they still asking for more. It is seam that is a never-ending endeavor. I think that we are victim of a fraud. Overly complicated, it surely made by expert. All that money has been asked by SAT (they say). They are using SAT to steal people money. I wanted to inform the FBI with a complete case. I live in Canada.
1. Have you contacted the Notario? If not, do so.
If they can not or will not provide contact information for the Notario you are probably being scammed.
2. how do you know “Holdings firm (USA)” is actually a USA enterprise? Because they said they are? The FBI needs more to go on that that.
best of luck
Robert, I have the exact same situation going on right now. Contact me, dagraham@grahamlpa.com
How do I contact the Notario? Do they have an option to contact in English?
Pick a good Notario, and call them.
Like Raul Pino Navarette, Notario
http://www.puertoypino.com/