TAX ON RENTAL INCOME: PAYING IT and BEING LEGAL IN MEXICO

If you need help with your US taxes on rental income, or your other Mexico income email us at taxmeless@gmail.com or visit our website at www.taxmeless.com.  We are CPAs and attorney with over 30 years experience with Americans living in Mexico and their taxes.

TEMPORARY VISA REQUIRED?  I read an article on the internet about your services.  We have spoken to an accountant in PV about paying taxes on our rental income.  One accountant has told me I need to get my temp visa. This seems like a hassle when I am using the condo only a short time each year.   What is your take on this?

 Ronnie from Puerto Vallarta

Hi Ronnie:  Thanks for your email.  Per Articles 158 and 159 of the Tax Code, a visa, other than a tourist visa when you visit Mexico, is NOT necessary.    As a non-resident you may rent your property and pay taxes in compliance with Mexican law.   Additionally, due to treaties, there is no double taxation and expenses of your property can be deducted in your country of residence

IS RENTING MEXICAN PROPERTY PROHIBITED? I have been told that the standard bank trust wording for foreign individuals does not permit the rental of residential property at all.   How can you offer to pay taxes on income on a prohibited activity?

 Jim from Playa del Carmen

Hi Jim.   The foreign investment law specifically permits the beneficiary (foreigner) to rent, sell, modify their properties and to collect the profits therefrom.      Many trusts state that the bank must pay the taxes but we know that will not happen.   It has been our experience that if the foreigner pays his/her taxes on rental income and has the receipts to prove it there is absolutely no quarrel with Mexican officials.        

OUR PROPERTY TITLE IS IN AN LLC.   HOW CAN WE PAY TAXES ON THE INCOME?

Marilyn from Cozumel

Hi Marilyn.   Thanks for your question!  We will need to have your documents translated and authorizations prepared in the name of the LLC and signed by the legal representative.  With this we can pay your taxes and provide you with receipts which will be accepted by the tax authorities in your country of residence.

IS THE FIDEICOMISO THE PROPERTY DEED? 

 June from Michigan with property in Ixtapa.

Yes, the Fideicomiso to hold property in the restricted zone of Mexico is both a contract with the Mexican bank to hold your title as trustee, and also is the deed to your rights in the property.

WE HAVE HEARD THAT OUR PROPERTY CAN BE SEIZED BY THE GOVERNMENT IF TAXES ARE NOT PAID MONTHLY.   IS THIS TRUE? John from Puerto Penasco

Yes.   Definitely failure to pay taxes on income is a violation of the Mexican law and property can be attached and sold as payment for past due taxes after a procedure similar to that used by the US and Canada tax authorities.  To date the Mexican tax authorities have not aggressively pursued violators but this is changing as they have access to internet and rental promotion programs.

PENALTIES FOR NOT FILING,  FOR NON-PAYMENT:   The penalty for not being enrolled as a taxpayer is 2,740. To 8,230 mxn.    The penalty for not making declarations as required range from 1,100. To 13,720. Mxn  per month in addition to interest at the rate of 1.13% per month on the amount owed.   These penalties are being adjusted upward to compensate for exchange rates, etc.

Mexico has tax treaties with 32 countries,   no double taxation!

PAYING TAX ON YOUR RENTAL INCOME FROM MEXICAN PROPERTIES IS A MUST, WHETHER YOU LIVE IN MEXICO OR NOT.  GET LEGAL and AVOID THE CONSEQUENCES OF TAX EVASION!