mexico taxes

SAT Clarifies Mexican Income Taxes for Foreigners
Posted on September 16, 2017 by yucalandia
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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>
> TAX OBLIGATIONS FOR FOREIGNERS IN MEXICO
> DEATH and TAXES…..both are inevitable!
> By Linda Neil
>
> Whether a property owner or just the occasional visitor on a beautiful
> beach in Mexico, everyone pays taxes, natives and foreigners. Some of
> the taxes are hidden and others are not. The purpose of this article is
> to touch on some of the important taxes levied and paid in Mexico.
>
> WHO COLLECTS TAXES: The SAT (Servicio de Administracion Tributaria),
> also known as Hacienda, is the federal tax collector. It collects all
> federal taxes such as the ISR (Income or Capital Gains) tax, the IVA
> (Added Value) tax, the IDE (Tax on Cash Deposits) and the IEPS (Special
> Tax on Production and Services). Each state government has its own taxes
> such as the 2 to 3 percent tax on lodgings and tourism. The municipal
> governments assess and levy taxes on real and personal properties.
>
> IVA TAX: This is the Value Added Tax which is charged on goods and
> services. The only exemptions are medicines and food. Often this tax is
> INCLUDED in the price of food served in a restaurant, legal services,
> and the items purchased in a department or clothing store. The business
> owner and tax resident is obligated to file a monthly declaration with
> Hacienda and pay the tax on earnings. Credited against this tax are IVA
> taxes paid on goods and services acquired.
>
> There is no IVA tax on the sale of vacant land or on the sale of
> residential dwellings. The tax is levied on all commercial construction
> when it is sold or transferred, at the rate of 16% of the value of
> construction, regardless of where the property is located.
>
> IVA tax is charged on lodgings, hotel rooms and furnished homes which
> are rented.
>
> As of January 1, 2010, this tax has been increased from 15% to 16% in
> the interior of the country and from 10% to 11% in the border zones.
>
> IEPS TAX: This is the Special Tax on Products and Services which is a
> new tax for 2010. It will cover certain internet and cable TV services,
> alcohol, cigarettes, and gaming.
>
> PROPERTY TAX; This is a municipal tax with... Click Here For Additional
> Information