SAT is Verifying Compliance with Tax Requirements on Rental Income.

SAT, the Secretary of Attention to Taxpayers, the equivalent of the US – IRS, Internal Revenue Service, and Canada’s CRA Canadian Revenue Agency, is reviewing social media sites, including Air BnB and VRBO, to determine who is offering property for rent and who is receiving unreported income.


Evasion of tax is a criminal offense. Articles 150 to 178 of the Fiscal Code provide for imprisonment of up to six years for evasion of taxes. Not only is it a criminal offense but the taxpayer must pay the past due taxes and very substantial interest penalties which amount to 1.3% per month, compounded. Unless taxes and accrued penalties are paid in a timely manner the property can be seized and put up for auction. Additionally, in a reform of Article 118 of the Fiscal Code, no landlord may demand payment of past due rent in the courts without submitting proof of tax compliance.


The Mexican government has decreed that income generated from the rent of a Mexican property is due and payable in Mexico, regardless of where the income is received. And it is getting very serious in its efforts to collect this tax and to punish those who evade payment, whether through intention or ignorance. SAT has determined ignorance is not a legitimate excuse. This growing issue and omission now represents a glaring 1% of Mexico’s Gross Domestic Product. Mexican authorities are anxious to correct this shortfall.


There are programs in place for both Residents in Mexico and Non-Residents of Mexico, to declare and pay the lawful taxes which include both the tax on income (ISR) and, in the case of a unfurnished rental, the 16% added value tax (IVA). Realistically there is no way to legally avoid declaring and payment of these taxes. To continue to evade this responsibility will put the affected property at risk.


And the good news, due to Mexico’s tax treaties with 32 countries, double taxation is never an issue.

For details on how to clean up your tax obligation and proceed, please contact rentaltaxmexico@settlement-co.com Read more about the Mexican income and iva taxes on rental income at www.rentaltaxmexico.com If you wish to discuss your situation and how to resolve it with a US Attorney with expertise in Mexico taxes EMAIL US TAX ATTORNEY

SAT Mexico Tax Website

If you read Spanish or use Google chrome with automatic translations go to www.sat.gob.mx to find your Mexico tax info. This is the official "Hacienda" website of Mexico's taxing agency.

Mexico introduces tax amnesty program – U.S. businesses with pending tax disputes in Mexico should consider immediate action

2013 Mexican Tax Reform Law

Mexico introduced a comprehensive tax amnesty as part of the 2013 tax reform published in the Mexican official gazette on December 17, 2013. Under the program 80 to 100 percent of federal tax debt and related penalties incurred by companies and individuals are forgiven upon request of the taxpayers. Tax penalties for 2012 and 2013, other than penalties for failure to pay the tax, are also reduced by 60 percent.

General conditions. Under the tax amnesty program initiated by the Mexican tax authority (Servicio de Administración Tributaria - SAT) 80 to 100 percent of tax debt of individuals and entities will be forgiven based on the taxpayer's request to the extent the tax debt originated from tax obligations incurred before January 1, 2007.

The amnesty program also allows for a 60 percent reduction of penalties, other than penalties for failure to pay the tax, for the years 2012 and 2013 to the extent such penalties are paid within 30 days of receiving the tax authorities' notification about the penalties.

The amnesty program is part of the 2013 tax reform law (Ley de Ingresos) that was approved by the Mexican parliament on December 13, 2012.

Scope of the amnesty. The tax debt that is covered by the amnesty may be due to omission of income; failure to pay federal income tax or trade import duties (cuotas compensatorias); inflationary interest and penalties regarding either the federal tax or trade import duties; and penalties due to the failure to comply with federal tax obligations other than the payment of the tax (e.g. reporting obligations).

Taxpayers, that have been under SAT audit for tax years 2009, 2010 and 2011 and where the SAT determined as a result of the audit that there had been no tax deficiency or where the taxpayer paid the tax deficiency found by the SAT, will be granted a 100 percent forgiveness of the pre-2007 tax debt.

Mechanics for requesting tax forgiveness. Taxpayers may request the forgiveness of their tax debt by submitting a written application to local office of the SAT corresponding to the taxpayer's domicile or corporate seat.

U.S. corporations or owners of Mexican corporations with operations in Mexico should carefully review their federal tax and trade import duty situation in Mexico for the years involved. Applying for the tax amnesty may result in significant tax savings. The tax amnesty seems to also apply to tax amounts that are under dispute with the Mexican tax authority including amounts that are being litigated in court. Obtaining forgiveness for disputed amounts may bring further savings as it would eliminate dispute and litigation costs.