PAYING TAXES ON RENTAL PROPERTIES LOCATED IN MEXICO



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By Linda Neil

Internet, blog sites, expat groups and Mexican newspapers are full of information about the growing problem of foreigners who are renting their homes or condominiums and failing to pay Mexican taxes. Not only is this a violation of Mexican tax law with severe penalties if discovered, but also it violates the terms of most bank trusts (fideicomisos) and could result in cancellation of the trust..

FOREIGNERS ARE OBLIGATED TO PAY TAXES ON INCOME GENERATED IN MEXICO no matter where the income is received.. 

There are three ways to do this and be in full compliance with the laws:

I. RESIDENTS in MEXICO can obtain their taxpayer identification number, electronic signatures and file taxes monthly using a blind deduction of 35% of income and paying tax on the remainder. No receipts are required for this tax payer status. An annual declaration must be filed in addition to monthly declarations.

II. . RESIDENTS in MEXICO can obtain their taxpayer identification number, electronic signatures and file taxes monthly declaring all income and providing receipts for certain allowable deductions. Tax on a sliding scale is assessed on the profit. . An annual declaration must be filed in addition to monthly declarations.

III. NON-RESIDENTS of Mexico may appoint a Mexican company to declare and pay tax on their behalf. Tax collected on the GROSS income is declared monthly and a set percentage is charged. NO RFC or taxpayer identification number is required. No annual declaration need be filed.

The above is for compliance with the ISR tax (the tax on income) Additionally, on furnished properties, a tax of 16% IVA (added value tax) must be collected by the owner and declared and paid to tax authorities.

NO DOUBLE TAXATION: Mexico has tax treaties with 32 nations. Taxes paid in Mexico can be taken as credits in taxpayer’s native country.

For additional information on paying tax on rental property in Mexico under any of these three options, please contact: info@settlement-co.com

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