Saturday, July 16, 2022

Mexicoś income tax rates personal and corporate income earned in Mexico

Go the following link to read about Mexicoś personal income tax rates on individuals. 

Cabo San Lucas - a Tax Haven?
https://taxsummaries.pwc.com/mexico/individual/taxes-on-personal-income.

Mexican corporations pay a flat rate of 30% of net profit.

Most Mexico dividends and interest paid by banks are taxed at 10% which is the amount the payor withholds when that income is distributed to you.

Need further advice or return preparation  on your US taxes with respect to you rental, business or other income from Mexico?  Email us at 
Mexico -US tax informaton

Sunday, May 29, 2022

PAYING TAXES ON MEXICAN RENTAL PROPERTY - FOR NONRESIDENT OWNERS

 Nonresidents of Mexico who own rental property there must pay Mexican income tax and in many


instances Mexican IVA (value added taxes) on their rental income.  Failure to do so can result in huge penalties when caught by the SAT (Mexican IRS).  If you rent out through VRBO or ARBNB they will

pay the taxe for you but if you have a long term rental or do short term rentals on your own, you must file the required tax returns. Now even those with FMM (tourist permits) can get an RFC (tax id number) so they can pay their Mexico income taxes. 

Read more about how Mexico rental taxes work here:http://rentaltaxmexico.com/

We have been assisting Gringos living and owrking in Mexico with their US taxes for over 20 years. Write us for more information:  Kauffman Nelson LLP, Certified Public Accountants  Email us for more information and assistance.


Register in the RFC as a natural person if you are a foreigner - Even if you only have a FMM (tourist visa)

Visit the SAT website to learn how to subscribe for an RFC as a fiscal person as a foreigner .  ( Learn more at SAT website: https://www.sat.gob.mx/tramites/97439/inscribete-en-el-rfc-como-persona-fisica-si-eres-extranjero  If you do not read Spanish use google to translate the webpage for you.   You must have this number if you rent out property you own in Mexico even though you do not have a temporary or permanent resident status.  Many Mexican banks and others are now requiring this number. The process securing an RFC tax number is complex and will require the assistance of a Mexican Notary.

If you rent your casa in Mexico you do own mexican income taxes on your rental income and in some situations Value Added taxes to the SAT (Mexican IRS). This number is required by the SAT.  If you rent through ARBNB or VRBO they have made arrangements to pay the tax for you though you do not have an RFC number and do not file a Mexican tax return.

If you do pay Mexican income taxes on your rental income you do get to claim it as a tax credit against the taxes you pay on your US Income Tax return on that rental income.  Yes your worldwide income MUST be reported on your US income.

How do Mexican rental taxes work?  Go to to learn how to properly handle your rental: http://rentaltaxmexico.com/  Failure to pay the tax can result in huge penalties and interest when the SAT finds you.

We have been helping Americans with their US taxes in Mexico for over 20 years and can help you with the complex international tax issues which may be involved.  We are US CPAs and Attorneys with over 20 years experience each in international taxation.  Email Don D. Nelson, Attorney at Law at ddnelson@gmail.com for more information and for assistance.

Tuesday, January 12, 2021

2021 US EXPATRIATE TAX INFORMATION FOR AMERICANS LIVING AND WORKING IN MEXICO

 If you are a US Citizen or green card holder you must file a US tax return every year unless your taxable income is below a certain threshold. Even if your income is below that threshold, you may still be required to file certain forms to report foreign assets, etc. Failure to file these forms can result in severe IRS penalties.

 If you do not itemize your health, tax, interest, charitable and miscellaneous deductions you get a standard deduction of $12,400 if single or filing as married filing separately or $24,800 if you file jointly with your spouse.

As a US expatriate living and working abroad 4/15/,21 your 2020 tax return is automatically extended until 6/15/21 but any taxes due must be paid by 4/15/20 to avoid penalties and interest. The return can be further extended until 10/15/21 if the proper extension form is filed. An even further extension until December may be available if the proper letter is sent to the IRS.


✦ For 2020 if you are a qualified expatriate you get a foreign earned income exclusion (earnings from wages or self employment) of $107,600, but this exclusion is only available if you file a tax return. You must qualify under one of two tests to take this exclusion: (1) bonafide resident test or (2) physical presence test. You can read more about how to qualify in IRS Publication 54. This exclusion only applies to income taxes and does not apply to US self-employment tax (social security plus medicare). You spouse who lives and works abroad with you will also be able to use this exclusion against any earned income they have abroad. You can lose this exclusion if you file your return more than 18 months late. The exclusion can only be claimed on filed tax return and does not apply if you fail to file a tax return.


✦ If you receive a gift of $100,000 or more during 2020 from a nonresident individual or nonresident corporation you must file form 3520 to report that gift. If you fail to file that form you will incur substantial penalties. .


✦ If your foreign earnings from wages or self -employment exceed the foreign earned income exclusion you can claim a housing expense for the rent, utilities and maintenance you pay if those amounts that exceed a minimum non-deductible amount. There is a limit to the housing amount and certain “high-cost” locations there is a higher amount of housing expense which can be considered. (For “high-cost” country limitations see Form 2555 instructions).


✦ You get credits against your US income tax obligation for foreign income taxes paid to a foreign country but you must file a US tax return to claim these credits. This avoids double taxation of the same income.


✦ If you own 10% or more of a Foreign corporation or Foreign partnership (LLC) you must file special IRS forms, or incur substantial penalties which can be greater including criminal prosecution if the IRS discovers you have failed to file these forms.


✦ If you create a foreign trust or are a beneficiary of a foreign trust you may be obligated to file forms 3520 and /or 3520A each year to report those activities or be subject to severe penalties. Foreign foundations and non-profits which indirectly benefit you may be foreign trusts in the eyes of the IRS.


✦ Your net self-employment income in a foreign country (earned as an independent contractor or in your own sole proprietorship) is subject to US self-employment tax (medicare and social security) of 15.3% which cannot be reduced or eliminated by the foreign earned income exclusion or foreign tax credits. The one exception is if you live in one of the very few countries that have a social security agreement with the US and you pay the equivalent of social security in that country.


✦ Forming the correct type of foreign corporation and making the proper US tax election (to cause the income and foreign taxes the foreign corporation pays to flow through to your personal US tax return) with the IRS for that corporation may save you significant income taxes and avoid later adverse tax consequences. You need to take investigate this procedure before you actually form that foreign because it can be difficult to make that election later and only certain types of foreign business entities are eligible to make this election.


✦ If at any time during the tax year your combined highest balances in your foreign bank and financial accounts (when added together) ever equal or exceed $10,000US you must file a FBAR form 114 with the IRS by October 15, 2021 for the 2020 calendar year or incur a penalty of $10,000 or more including criminal prosecution. Foreign financial accounts often include accounts in you sign on for a foreign corporation, foreign partnerships foreign pension plans, stock brokerage accounts, and cash surrender value of foreign life insurance. This form does not go in with your personal income tax return and can only be filed separately on the web at: http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html


✦ The IRS gets lists of Americans applying or renewing for US passports or entering the country. They will compare these lists with those who are filing US income tax returns and take action against those who do not file US returns but are US residents or citizens.


✦ Often due to foreign tax credits and the foreign earned income tax expats living abroad who file all past year unfiled tax returns end up owing no or very little US taxes. The IRS has a special program which will help you catch up if you are in arrears which will reduce or possibly eliminate all potential penalties for failing to file the required foreign asset reporting forms. We can direct you to the best program for your situation, prepare the returns and forms and represent you before the IRS.


✦ Beginning in 2011 a new law went into effect which requires all US Citizens report all of their worldwide financial assets with their personal tax return if in total the value of those assets exceed certain minimum amounts starting at $50,000. Failure to file that form 8938 on time can result in a penalty of $10,000. The form is complex and has different rules that apply to you if you live abroad or live in the US. This form is required in addition to the FBAR form 114.


✦ Certain types of income of foreign corporations are immediately taxable on the US shareholder's personal income tax return. This is called Subpart F income. The rules are complex and if you own a foreign corporation you need to determine if these rules apply to you when you file the required form 5471 for that corporation. For 2018 a new tax was enacted with the acronym of GILTI tax. This may or may not cause an owner of a Controlled Foreign Corporation (CFC) to owe taxes on the income it does not distribute to its owners. This GILTI tax applies to 10% or more owners of CFCs.


✦ If you own investments in a foreign corporation or own foreign mutual fund shares you may be required to file the IRS form 8621 for owning part of a Passive Foreign Investment Company (PFIC) or incur additional, taxes and penalties for your failure to do so. A PFIC is any foreign corporation that has more than 75% of its gross income from passive income or 50 percent or more of its assets produce or will produce passive income.


There are many more special tax laws too numerous to mention here that apply to expatriates, green card holderd. nonresidents and US taxpayers with foreign assets, businesses, etc. Please need to consult with Kauffman Nelson LLP if you have other offshore matters to be certain what is required to be filed.


Download your 2020 Expatriate Tax Questionnaire HERE Send us your completed questionnaire and we will immediately provide you with a flat fee quote for preparing your return(s).


Don D. Nelson, US Tax Attorney, Charles Kauffman CPA, Kauffman Nelson, LLP, CPAs

Visit our International Tax Blog for the Latest Expat and International Tax Developments at www.usexpatriate.blogspot.com / http://us-mexicantax.blogspot.com/


We have been preparing tax returns and assisting US clients located in over 123 countries around the the world for over 35 years. We also assist US Nonresidents meet their US tax obligations and return filing requirements. Email, skype or phone us for immediate assistance.


ARE YOU NOW CONFUSED? WE OFFER MINI TAX CONSULTATIONS BY PHONE, SKYPE OR EMAIL: The mini consultations (with attorney client privilege) to answer your tax questions and resolve your tax issues. Email ustaxmeless@gmail.com to learn more or request a consultation


Don D. Nelson, Attorney at Law, Kauffman Nelson LLP, CPAs
Huntington Beach, California USA
US Phone: (949) 480-1235, US Fax: (949) 606-9627
Email:ddnelson@gmail.com or ustax@hotmail.com
Skype address: dondnelson  Whatsapp: 1-818-519-9219

Monday, June 1, 2020

Excellent Contadore Accountant For Your Mexican Tax Returns

Many expats living in Mexico ask us for referrals to excellent Mexico accountants to help them with their Mexico income taxes and other Mexico Tax Matters.   We  have worked for years with  Lance and Sarahi and strongly recommend them to assist you. English is spoken. If you need help, contact:

Lance E Niederhaus, CPA
CP Sarahí Soto
LS Accounting & Tax Services SC
Mex Cell: +52 (624) 157-6605
Google Voice: +1 (949) 436-7737
Email: lanceniederhaus@icloud.com

If you need assistance with your US tax needs contact us at 949-480-1235 US or at our email address at taxmeless  We have been doing US taxes for Gringos in Mexico for over 30 years. We are experts at helping our clients catch up with the IRS and resolving problems resulting from not filing returns.


Tuesday, May 19, 2020

Mexico IVA and Income Taxes Will be Witheld from Payments made to VRBO, ARBNB, by vacation rental renters

Mexico vacation rental through VRBO
The Hacienda or SAT has reached a deal with VRBO, ARBNB and other web based vacation rental companies to withhold Mexico income taxes and IVA from payments made by renters on vacation homes. If you are using one of these services to rent your property stating June 1, 2020, these taxes will be withheld from your rent receipts prior to the balance being remitted to you as the property owner.

When you rent out yourself or a long term rental  or do not use one of web vacation rental companies you still must pay rental income tax and the tenant must pay IVA which you must collect.  If you are a premanent resident and have an RFC number you must file a tax return monthly and if you are a nonresident who owns the real property rented in Mexico you need to use one of the services such as the Settlement Company to pay those taxes. The tax rates are different for residents with RFC numbers versus others. Read more about it here.

The good news is that you get a credit for the Mexico income taxes paid against the tax you pay in Canada or US on that rental income and get to deduct the IVA. If you need assistance claiming the credit email us.  Many US accountants do not know how to claim a foreign tax credit while we have been doing for our clients for over 30 years. Email Kauffman Nelson LLP  .....US CPAs






Friday, May 8, 2020

CHANGES COMING IN THE COLLECTION OF MEXICAN TAXES ON RENTAL INCOME!


It has always been necessary to declare and pay tax on any and all income generated
by rental of Mexican properties. No news there! What is new is that the Mexican tax
authorities are taking an aggressive stance in tax collection and are requiring all
technological platforms (think VRBO, AirBnB, etc) to withhold and pay tax from income
generated.
This new law is slated to take effect on June 1, 2020. Due to the slowdown from CO-
VID 19, regulations and procedure have not been published and this may delay things a
bit. It IS coming however! Be prepared! More details to be published in the Gringo
Gazette in the May 25 edition.  Also watch this blog for further information or write us at