By Linda Neil
Who Collects the Tax
On the sale of a primary residence
For those who have sold or transferred a primary residence within the past five years and have not declared an exemption previously, an exemption of up to 1,500 UDIs or approximately 6,500,000. Mexican pesos, is available.
This applies to nationals and to those foreigners who have established a tax residency in Mexico (obtained their tax identification numbers) and make declarations on world wide income. They must also provide documents that the property being transferred is a primary residence.
On the sale of a vacation home or rental property
ON RENTAL INCOME: There are several ways to calculate tax on rental income:
2. A 30% tax on income, less allowable deductions which include property tax, maintenance, interest on loans for construction expenses, insurance, salaries of employees and commissions paid to rental agents and property managers.
3. A 25% tax on the gross income, no deductions.
Hacienda is paying more attention to internet advertising and is beginning to inquire into the income of those who are renting their homes. It makes sense to become legal since penalties for non-compliance can be considerable. Methods one and two above require the RFC (taxpayer identification number) which can be challenging for a foreigner to obtain. Method three outlined above does not require residency or official status.