Taxes on Rental Properties in Mexico – Your Questions Answered

What are the taxes you must pay on your rental income in Mexico?

1. Value Added Tax IVA (excise tax)                         
   
2. Income Taxes paid to SAT on a monthly basis

When are these taxes payable?

• Monthly  filed electronically

What happens if you fail to pay these taxes on your rental income?

• Serious penalties and interest can be assessed by the SAT and other tax agencies as well criminal charges might be filed.  If you manage the property for the owner, you as the manager may have liability for failing to file and pay these taxes.

How can I pay these taxes as a nonresident of Mexico on my income from my Mexican real property?

• If you are a tax resident of Mexico you can use your resident tax ID number and you have your Mexican accountant use your taxpayer identification number (RFC) to file and pay these taxes. However, if you are a nonresident of Mexico it is necessary to contact a Mexican professional or Organization (such as the Settlement Company) to file and  pay these taxes. The Settlement Company in Baja Sur Mexico has developed  legal method where these taxes can be paid by nonresidents.

How are these taxes treated on my US tax return?

• You must report your rental income and expenses on your US tax return on Schedule E (if you are an individual taxpayer).  A Mexican rental is treated the same as US rental in most respects. You can as a rental expense deduct the  IVA tax and local lodging taxes. You can claim the Mexican income tax paid on your rental income as as credit directly offsetting your US tax on the same rental income dollar for dollar. You do not get double taxed on your US tax return

If you need assistance paying your Mexican income and value added taxes (IVA) on your Mexican rental property go to www.rentaltaxmexico.com for more information and assistance.

We can help you with you US tax planning and return filing requirements for your rental property in Mexico. If you fail to follow the best procedure and in many cases make a special US tax election, it can have adverse tax consequences.  Email us at ddnelson@gmail.com for more.