Friday, January 27, 2017

Taxes You May Have to Pay as a Gringo in Mexico

There are some things about Mexican taxes you need to know if you are spending a lot of time anywhere in Mexico.

  • If you spend over 183 days in Mexico you are considered a permanent resident under Mexican tax law and are liable for their income taxes on your worldwide income. The enforcement of this rule is lax in many areas of Mexico, but since Mr. Trump is causing Mexico problems they may start to enforce it.  Their tax rate is much higher than the USA.
  • If you own property you rent out in Mexico even for a short time when you are no there, you owe VAT tax and income tax on your earnings. You are suppose to collect the VAT tax from the renter and pay income taxes on your rental income.  You can read more about the rules and how to pay these taxes if you do not have a Mexican tax ID number at:
  • If you sell real property in Mexico, it is the notary who handles the transfer that determines the amount of tax you pay on your gain.  How this is calculated does seem to vary.  If you are a permanent resident and you meet the criteria, and the property you are selling is your personal residence, that gain on sale may be exempt from tax.  See you Mexican accountant to learn the exact rules since the specifics as reported seem to be difficult to determine.
  • If you have a commercial property or business, and wish to own or operate it in a Mexican Corporation, it is best to use the form of corporation that is a Sociedad de Responsibilidad Limitada (SRL), since you can make certain elections for US tax purposes that make it a flow through entity and thus you will not suffer double taxation on your US tax return and can claim tax credits for the income taxes it must pay in Mexico
  • Email us if you need help with your US tax planning for Mexico.

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