Saturday, June 8, 2019


An actual true story but the names and places have been changed to protect the guilty.
1.  Bill and his wife Sarah rent out their  condominium in San Jose for 5-6 months
out of the year on a weekly or monthly basis to tourists.  Though they report their
rental income and expenses on their US tax return, they have never paid any
taxes on that rental income to the Mexican tax authorities.  Their neighbors
have told them not to worry, since no one ever pays taxes on vacation rental
income in Mexico and probably do not have to.

Is this actually true?  No!  Definitely not!   Bill and his wife must pay taxes on
their income which is generated in Mexico!

What kind of taxes should they be paying and how much?.  They must pay
the ISR tax a type of income tax, in the amount of 25% of the gross rents and,
if the unit is furnished, a 16% Value Added Tax (IVA).

An important point  The ISR TAX they pay can become a tax credit in the US,
so double taxation is avoided.   The 16% IVA tax is generally paid by the tenant
and is simply declared by the landlord.
What are the penalties, interest, etc. they might incur?  The penalty for not
being enrolled as a taxpayer is 2,740. to 8,230 pesos.   The penalty for not making
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.

Are there any other possible legal consequences for failing to pay taxes
on rentalincome from their condominium?   If the tax authorities have not
discovered the illegal rental income and notified the landlords, back interest
and penalties may be waived.It is important, however, to begin declaring and
paying prior to discovery.

If you want to pay the taxes Mexico imposes on rental income we can help.
Contact us at We are US attorneys and CPAs and
can refer you to a firm in Mexico that can help with your Mexican taxes and
we can help with your US tax return on that income. Visit our website
at for a a lot of useful information.