US Tax Factors When Forming a Mexican Corporation

 There are two main types of Mexican corporations.  Both are taxed in the same way in Mexico but only when  of those two are  eligible for often advantageous tax treat on your US tax return if the proper election is made for US tax purposes. That US tax election must be made with the IRS within a certain time period after your Mexican corporation is formed.  If you do not make the election in that period making it later may cause you to pay unnecessary US and Mexico income taxes.

The two primary types of Mexico corporations are (a) Sociedad Anonima or (2) Sociedad de Responsabilidad Limitada.

We can help you chose the best type of Mexico corporation for your Mexico business or real estate ownership or rental property.  This of course depends on the net profit you project the corporation to make. We can also help you file the election  (if you have the correct type of corporation in Mexico) with the IRS which will allow you to take a tax credit on your personal US return for taxes paid by the corporation in Mexico. That tax credit will reduce your US taxes you might have to pay on that corporate income.

We can help you chose the best type of Mexico corporation to achieve the optimum savings on your US tax return.  Email US to set up a mini- consultation before you form your Mexico corporation. CONTACT US HERE

Rental taxes on foreign property owners in Mexico, municipal taxes, IVA, and Mexico Income Taxes

               According to some very sharp Mexican  rental tax accountants, foreigners renting a home or condo (or even two of them) should not be liable for the 3% hospitality tax.   It is a municipal tax designed to be paid by hotels and larger establishments who do business generated from tourism, not the little guy with a unit or two who rents periodically.  

AirBnB is currently negotiating with collecting  the  tax for local governments who love them by promising increasing income.  No tall vacation rental sites are doing this.

What they do not consider is the FEDERAL taxes that are all important and charged by SAT.  For the non-resident owner of a home or a condo who rents it out the tax is 25% of gross income and there is an additional obligation to collect the 16% IVA tax and send it to the SAT authorities.   Additionally it is necessary for the non-resident foreign owner to appoint a Mexican company or individual to collect and pay their taxes for them.

All these payments are then deductible or can be taken as credits on that same rental income as required to be reported on their US federal and state tax returns. Therefore there is no double taxation

Failure to declare and pay Mexico's FEDERAL taxes can result in heavy fines or even loss of the property.  The same can be said for failure to report to the IRS.

If you need information on the US tax consequences of your foreign rental property and how to reflect it on your return email: ddnelson@gmail.com