Saturday, December 23, 2017


By Kyle Lodder, CPA
President Trump has signed significant U.S. tax legislation into law today, namely the “Tax Cuts and Jobs Act”.
There are many favorable tax provisions that will benefit many taxpayers, for individuals and businesses. But there are also some quite unfavorable international tax provisions which may adversely impact business owners of non-U.S. corporations.
One specific new provision relates to U.S. persons who own an interest in a non-U.S. corporation.
Under prior law, U.S. shareholders generally are taxed on all income, whether earned in the U.S. or abroad. Foreign income earned by a foreign (non-U.S.) corporation generally is not subject to U.S. tax until the income is distributed as a dividend to the U.S. shareholder.
Under this new law, certain U.S. shareholders owning at least 10% of the foreign corporation generally must include in income starting in 2017 the shareholder’s pro-rata share of the net post-’86 historical earnings and profits “E&P” (i.e. accumulated unrepatriated earnings) to the extent it hasn’t been previously taxed in the U.S.  This is a one-time tax as the U.S. attempts to transition from a worldwide tax system to a territorial type of tax system.
The portion of the historical earnings comprising of cash or cash equivalents is taxed at a reduced rate of 15.5%, while any remaining E&P is taxed at a reduced rate of 8% (it works out to a bit higher rate in some cases). The lower tax rate is intended to recognize that non-cash assets are illiquid and/or in productive use in the business. Nonetheless, this could be a significant tax hit for this upcoming tax season, although there is an option to elect to defer the payment over eight years.
Another problem with this tax is that it’s on deemed income. There isn’t an actual dividend. Rather, it’s deemed income for U.S. purposes. In most foreign countries, this deemed income isn’t considered taxable income. The challenge then is that it’s taxed in the current year for U.S. purposes but not in the foreign country. And when the money is distributed in the future, it typically is treated as a dividend in the foreign country, but not in the U.S. It causes a mismatch and often the lack of use of foreign tax credits, resulting in true double taxation.
What to do by year-end?
If you have significant retained earnings, it’d be worth contacting us to see if there are some planning moves to be made prior to year-end. Perhaps it makes sense to withdraw money from the company before year-end to trigger an actual dividend in the U.S. and the foreign country. This will trigger income in both countries to allow for utilization of foreign tax credits. Furthermore, simply withdrawing the money by year-end will allow for us to then determine after year-end how to classify the withdrawal (as a dividend, wage or loan for example).
If there remains tax exposure after considering foreign tax credits, it could make sense to gift shares to a non-resident alien spouse before year-end to a smaller ownership percentage level to avoid this tax.
This is a very new tax concept and not a lot of time has been granted to us to plan around this matter.  Yet, it makes sense to look at this before year-end to see if any moves can be made prior to year-end to put you in a better tax position.
If you require additional information on any aspect of these complex rules, please contact Kyle Lodder CPA at 360.599.4340 or  You can also contact Don D. Nelson International Tax Attorney at or 949.480.1235. Kyle works with our firm.

The material appearing in this communication is for informational purposes only and should not be construed as legal, accounting, or tax advice or opinion provided by Lodder CPA PLLC. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although these materials have been prepared by a professional, the user should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information

Thursday, November 9, 2017

All About Real Property Taxes in Mexico

Nick Fong a well known and respected real estate brokeri in Los Cabos has written an excellent article  on everything you need to know about  Property Taxes in Mexico (click on link )

Friday, October 20, 2017

IRS Announces 2018 Tax Brackets, Standard Deduction Amounts, And More

The article linked below from Forbes on the 2017 tax brackets, deductions, etc.  A lot of this may change if Congress succeeds in changing the tax laws this year.  Congresses current plan would generally provide large breaks for the wealthy, small breaks for the middle class and little for the poor. Read the article here

Wednesday, September 20, 2017


Read the following article on the key reasons people are retiring or moving to Mexico to conduct their businesse while living a great lifestyle:

If you are thinking about such a move and wish to know more about the US tax consequences and the Mexican tax consequences, email us at  We have hundreds of clients in Mexico and spend six months a year there. We can give you the information you need.

Tuesday, September 5, 2017

Mexico Enforcing 6 Month Tourist Visas and Payment of Taxes By Gringos Living and Working in Mexico

Mexico is now getting tough on 6 month tourist visas and collecting taxes from gringos renting property in Mexico and earning money while living in Mexico.  See more at the link to the article on Yucalandia.

If you are renting property in Mexico and not paying taxes read the rules

If you are working and earning money in Mexico read the tax rules at:

If you need help with your US taxes while in Mexico contact us at   Remember, you must still file a US tax return on your worldwide income even though you are paying taxes in Mexico. You do get exclusions and credits for taxes you already paid in Mexico. The statute of limitations never expires for the IRS to assess and collect taxes against your worldwide income if you fail to file a US tax return when you are required to file.

Saturday, July 15, 2017

Best Places to Retire Abroad...Mexico

Read about Chuck Bolotins current travels through Mexico with his wife and 2 dogs. Covers place@, experiences, travels and people other than taxes .  READ LINK BELOW

Wednesday, July 12, 2017

Legal Aspects of Establishing a Business in Mexico

When you start a business in Mexico, you have decide whether you incorporate; what type of corporation or set up a branch of your US corporation.  If you are a permanent resident you can also set up a sole proprietorship. Below is a great article of the subject written in 2017 (so it is current).

If you wish to review the US tax and legal ramifications of doing business in Mexico with a US attorney who has hundred of clients in Mexico and has been assisting them for over 25 years you should email Don D. Nelson , Attorney at Law at     The proper legal and tax guidance will save you not only money but untold problems.

Saturday, July 8, 2017

Everything You Wanted To Know about Buying, Selling, Owning, Renting and Occupying Real Property in Mexico from MLS Baja

The list of articles on this link includes almost everything you need to know about real estate law, taxes and ownership in Mexico . It is put together by the Baja Sur MLS and is a great compilation of knowledge from the experts.  SEE INDEX OF AVAILABLE ARTICLES HERE.

If you need help with US taxes in Mexico or rental taxes on Mexico properties, email us at

Wednesday, February 1, 2017


What are the consequences of failing to report the rental income in Mexico? You will be liable for not being enrolled as a taxpayer which can cost you from 2,740. to 8,230 pesos when assessed by the SAT.   The penalty for not making rental tax declarations as required range from 1,100. pesos to 13,720. pesos per month in addition to interest for not paying on time and as required is 1.13% per month.  The amount of the penalty may depend upon whether or not this is your first violation.

Should you go back and pay in those taxes for past years when you failed to pay the rental income and VAT taxes?   If the Mexico tax authorities have not notified you are in violation of the tax code, you probably will not need to file back taxes (but there are no guarantees).   The important point is to begin paying now on your rental income from your Mexican properties and to be consistent in the future.
target="_ Remember also to pay your US taxes on that rental income. You can then claim a credit or deduction for the taxes you paid in Mexico on the same income so you are not double taxed. Have questions? Email us at

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.

Saturday, January 21, 2017

Buying and Selling Real Estate in Mexico - Reality Check on Enforcement of the Contract

When you buy or sell real estate in Mexico brokers and agents sometimes tell you that everything is done differently in Mexico than in the USA.  While in many respects, there are some differences, many parts of the process are remarkably similar to the USA.  Therefore, you should make sure your contract contains the same protective clauses and paragraphs you will find in a US contract of sale.   Using the California Association of Realtors contract as a guide is a good place to start when reviewing the contract given you by the RE agent, and making changes and improvements.

Where their may be some differences in the law, there are hugh differences in the enforceability of the contract.  Why?  The difference arises due to the Mexican legal systems, courts and the extremely long time in many areas of Mexico it takes to get a judgement or decision.  It can easily in some areas of Mexico take 5 or more years to get a judgment and sometimes due to factors not usually encountered in the US, the decision in any lawsuit may not be the correct one.

What is the solution?  Write a good contract and in the event a dispute arises, make certain it contains a mediation and arbitration provision.  The arbitraion laws are excellent in Mexico and if you and the other party agree to arbitrate it is likely you will resolve your dispute within  8 to 12 months.  That decision is then entered into the Court as a judgment.  Most arbitration are binding and cannot be appealled ( unlike most Court judgments in Mexico which are often appealled adding many more years to the final decision).

If you want to learn more about arbitraion or mediation, the clauses to put in your next contract, and how to have a dispute arbitrated or mediated, email us a   If all parties agree, you can even remove your case from the Courts and have it decided by arbitration.  It is even legal to have the arbitrator be a US attorney or a panel of US and Mexican attorneys with real estate experience. Due to the speed of the process, you may save a lot of money in costs and attorneys fees.

Wednesday, January 18, 2017


Reuters Article of the day

By Michael O'Boyle and Frances Kerr

MEXICO CITY (Reuters) - Mexico must be ready to respond immediately with its own tax measures if the incoming administration of President-elect Donald Trump imposes a border tax, the economy minister said on Friday, warning such protectionism may trigger a global recession.
Trump, who takes office on Jan. 20, has promised a "major border tax" on companies that shift jobs outside the United States, and such a measure could hobble Mexico's exports to its top trading partner.
"It is clear we need to be prepared to immediately neutralize the impact of such a measure", Economy Minister Ildefonso Guajardo said in an interview on Mexican television.
"And it is very clear how - take a fiscal action that clearly neutralizes it", he said.
Trump has repeatedly attacked Mexico over trade, jobs and immigration since he first launched his run for the White House in 2015, driving the peso currency to historic lows and unnerving investors, especially in the auto sector.
Guajardo said Trump's proposed tax "was a problem for the entire world" and that it "would have a wave of impacts that could take us into a global recession".
Nonetheless, the minister said he expected foreign direct investment in Mexico this year to total around $25 billion, with investment in the energy and telecommunications sectors expected to more than make up for the loss of a planned $1.6 billion Ford Motor Co. factory that the company said this month it is cancelling. Trump had strongly criticized the plan, but Ford said its decision was not the result of pressure from Trump.
Guajardo also praised the government of Japan and Toyota Motor Corp for their "reasonable" response to Trump's threat to impose a significant border tax if the company does not stop making its Corolla model in Mexico for the U.S. market. Toyota said last week the automaker has no immediate plans to curb production in Mexico.
"Toyota has 10 plants in the United States... and employs more than 130,000 Americans. If I were Mr. Trump, I'd treat them with more respect", Guajardo said.
He added that he expects total foreign direct investment during the six-year term of President Enrique Pena Nieto, which ends in late 2018, to average $30 billion annually.
Guajardo has previously warned that U.S. corporate tax cuts proposed by Trump, as well as the border tax, could undermine foreign investment in Latin America's No. 2 economy.
Mexico slapped a tax on U.S. high fructose corn syrup in the early 2000s after the United States refused to allow free trade in Mexican sugar.