{"id":3690,"date":"2021-09-13T16:49:00","date_gmt":"2021-09-13T22:49:00","guid":{"rendered":"https:\/\/mexpatrealtors.com\/?p=3690"},"modified":"2023-04-06T20:36:23","modified_gmt":"2023-04-07T02:36:23","slug":"mexican-taxes-for-foreigners","status":"publish","type":"post","link":"http:\/\/mexpatrealtors.com\/es\/mexican-taxes-for-foreigners\/","title":{"rendered":"Mexican Taxes for Foreigners"},"content":{"rendered":"<p>With its innumerable attractions and great quality of life,&nbsp;<strong>Vallarta \u00b7 Nayarit<\/strong>&nbsp;is a tourist destination that attracts thousands of foreigners who come to vacation or reside for long periods. In order to respond to the high residential demand, the region has developed a strong real estate industry with an extensive inventory, the sale and rental of properties a widespread practice among foreigners. However, many who come to Mexico have questions about whether they need to pay Mexican taxes when they rent or sell a property in the country and, if so, which, how and why.<\/p>\n\n\n\n<p>At the recent&nbsp;<strong>Vallarta Real Estate Fair<\/strong>, held by&nbsp;<strong>Timothy Real Estate Group<\/strong>, this topic was among those that generated most interest among attendees. Expert on taxes for foreigners&nbsp;<strong>Paula Blanco<\/strong>, public accountant for the Escuela Bancaria Comercial&nbsp;<strong>(Commercial Banking School)<\/strong>, was flooded with questions at her presentation \u201cMexican Tax Issues for Foreigners.\u201d For this special article on taxes owed by foreigners who sell or rent real estate, we interviewed this subject expert, who is also the director of Equilibrium, a tax, accounting and administrative consulting firm.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full is-resized\"><img fetchpriority=\"high\" decoding=\"async\" src=\"http:\/\/mexpatrealtors.com\/wp-content\/uploads\/2021\/09\/Paula-Blanco-2.jpg\" alt=\"\" class=\"wp-image-3713\" width=\"490\" height=\"342\"\/><figcaption class=\"wp-element-caption\">Paula Blanco, public accountant for the Escuela Bancaria Comercial<\/figcaption><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>Primary Concerns<\/strong><\/p>\n\n\n\n<p>Blanco says that the first question asked, mainly by US and Canadian citizens, is whether they will have to pay taxes in Mexico for the income they receive from the rental or sale of their properties in our country and, if so, how to show the government of their country that they have already paid Impuestos Sobre la Renta (ISR) (income tax) in Mexico.<\/p>\n\n\n\n<p>\u201cOne of the issues of greatest concern is double taxation, that is, paying income tax in both their country of origin and their country of residence. The US and Canadian governments charge income tax to all their citizens, regardless of place of residence. There are agreements between countries to avoid double taxation, so that if you show the government that you already paid taxes for income in the other country\u2014in this case Mexico\u2014you receive a discount on the tax you owe and avoid paying double taxes,\u201d assures Blanco.<\/p>\n\n\n\n<p>Another of the issues that most ask is the simple \u201cwhy\u201d pay taxes for selling or renting your property here. The answer to this whole question is basic: \u201cIf you have a property in Mexican territory that is generating income\u2014be it for sale or rent\u2014regardless of the location of the bank to which the income is transferred, you have to pay Mexican taxes because it is a commercial transaction made in this country.\u201d<\/p>\n\n\n\n<p><strong>Why Must I Pay Taxes in Mexico on These Activities?<\/strong><\/p>\n\n\n\n<p>According to the Mexican Ley del Impuesto Sobre la Renta (Income Tax Law), there are three reasons a foreigner must pay Mexican taxes:<\/p>\n\n\n\n<p>\u201cThe first is \u2018source of wealth,\u2019 for income a foreigner generates from a commercial activity carried out in Mexico, like the sale or rental of a property. The second is \u2018permanent establishment,\u2019 when a person or entity carries out commercial activities for more than 183 days in the country. And the third is \u2018tax residence,\u2019 when a foreigner resides in Mexico for more than 183 days and generates income in the country. By meeting any of these conditions, you are obligated to pay taxes in Mexico,\u201d says Blanco.<\/p>\n\n\n\n<p><strong>Does Immigration Status Make a Difference?<\/strong><\/p>\n\n\n\n<p>Any foreigner, regardless of immigration status, must file taxes if they meet any of the aforementioned requirements. However, there are differences:<\/p>\n\n\n\n<p>If you file as No-Residente, you are required to appoint a legal representative with power of attorney, who will represent you before the authorities in case there is a fiscal offense. In addition, the tax is 25 percent of gross income, and 16 percent IVA (value added tax) must be paid, with no option for deduction.<\/p>\n\n\n\n<p>Therefore, the expert recommends filing as Residente. \u201cIt\u2019s the simplest, most economical way, and you do not involve a third party. When you obtain residency, you receive a CURP (Clave \u00danica de Registro de Poblaci\u00f3n) (similar to a social security number), and with this you can apply for your RFC (Registro Federal de Contribuyentes), similar to a tax ID, where your tax rate ranges between 10 and 35 percent of your net income, plus being able to deduct IVA at the time of filing.\u201d<\/p>\n\n\n\n<p><strong>What Taxes Are Due on a Sale or Rental?<\/strong><\/p>\n\n\n\n<p>For temporary accommodations or rentals, there are three types of tax: ISR, which is between 10 and 35 percent of income, depending on your immigration status and regimen; IVA, which is 16 percent (charged to the guest); and Impuesto al Hospedaje (Lodging Tax), which is 3 percent in Jalisco and Nayarit.<\/p>\n\n\n\n<p>If the income is generated by the sale of a property, the tax due is based on capital gain. In this case, there are three variants:<\/p>\n\n\n\n<p>ISR as No-Residente is 35 percent or more of the gain and is retained by the notary, who pays it directly to the State.<\/p>\n\n\n\n<p>ISR as Residente is also 35 percent and retained by the notary, but by having an RFC and being able to obtain&nbsp;<em>facturas<\/em>&nbsp;(official receipts) you can deduct up to 700 UDIS (Unidades Diarias de Inversi\u00f3n) (Daily Investment Units), which is approximately $4,000,000 pesos.<\/p>\n\n\n\n<p>ISR for businesses is 30 percent and is not withheld by the notary; instead, the&nbsp;<em>persona moral<\/em>&nbsp;(legal entity) must declare it as sale of assets and specify the gain obtained in its annual declaration.<\/p>\n\n\n\n<p><strong>Regimens for Filing Taxes<\/strong><\/p>\n\n\n\n<p>If the foreigner obtains Residente status, he can file taxes as a&nbsp;<em>persona f\u00edsica<\/em>&nbsp;o&nbsp;<em>persona moral<\/em>&nbsp;(physical or legal entity). In the case of a&nbsp;<em>persona f\u00edsica<\/em>, there are two regimens:<\/p>\n\n\n\n<p>The R\u00e9gimen General para las Personas F\u00edsicas con Actividad Empresarial y Profesional (General Regimen for Physical Persons with Business and Professional Activity) incurs ISR rates between 10 and 35 percent of net income, IVA (16 percent, less deductible) and 3 percent lodging tax.<\/p>\n\n\n\n<p>The R\u00e9gimen de Incorporaci\u00f3n Fiscal (Fiscal Incorporation Regimen) \u201cis the most convenient and offers the most benefits,\u201d according to Blanco. As she explains, it is a transitory regimen that lasts 10 years. In the first year, it gives the foreigner a 100 percent discount on ISR, in the second 90 percent, and so on, until year 11, when they change to the R\u00e9gimen General. \u201cWith this, they can use simplified accounting and above all save.\u201d However, there are two conditions that prevent qualifying for this regimen: the interested party cannot be a partner or shareholder in a legal entity in Mexico and their gross income from commercial activity cannot exceed $2,000,000 pesos per year.<\/p>\n\n\n\n<p>The third option is to establish a Sociedad Mexicana, where the tax is fixed at 30 percent of net income. However, they have more obligations and need to have a partner.<\/p>\n\n\n\n<p><strong>Getting Tax Advice: Guarantee of Tranquility<\/strong><\/p>\n\n\n\n<p>Finally, public accountant Blanco recommends that foreigners who qualify to pay taxes do so through someone with experience in tax matters. \u201cIt is important to go with someone who knows the laws well, who knows how to analyze all the income they are receiving, what the conditions are and, in the case of double taxation, what treaties exist between Mexico and other countries, to be able to look for a strategy that suits them and thus prevents paying extra taxes. In tax matters, there are laws that change every year in Mexico, and here it is not as easy to file taxes as in the United States, where even a ticket serves to file. Here, deductions have many conditions, and you must know what to deduct, what is cumulative income and what is not. There are many provisions that change five or six times a year, and you need a professional who is constantly updated on the matter.\u201d<\/p>\n\n\n\n<figure class=\"wp-block-image is-resized\"><img decoding=\"async\" src=\"http:\/\/vallartarealestateguide.com\/wp-content\/uploads\/2018\/04\/AdobeStock_101840182.jpeg\" alt=\" Mexican Taxes for Foreigners\" class=\"wp-image-4536\" width=\"563\" height=\"375\"\/><\/figure>\n\n\n\n<p>Para asuntos relacionados con\u00a0<strong><em><a href=\"http:\/\/mexpatrealtors.com\/es\/\">bienes ra\u00edces en Puerto Vallarta<\/a><\/em><\/strong>, o\u00a0<strong><em><a href=\"http:\/\/mexpatrealtors.com\/es\/\">real estate in Bahia de Banderas<\/a><\/em><\/strong>,\u00a0<strong><em><a href=\"http:\/\/mexpatrealtors.com\/es\/\">property management<\/a><\/em><\/strong>,\u00a0<strong><em><a href=\"http:\/\/mexpatrealtors.com\/es\/\">buying houses in Puerto Vallarta<\/a><\/em><\/strong>,\u00a0<strong><em><a href=\"http:\/\/mexpatrealtors.com\/es\/\">buying condos in Puerto Vallarta<\/a><\/em><\/strong>\u00a0or the surrounding areas Mexpat Realtors in Puerto Vallarta is a great resource call them or go to their website\u00a0<a href=\"http:\/\/mexpatrealtors.com\/es\/\">www.mexpatrealtors.com<\/a>\u00a0for more information<\/p>\n\n\n\n<p>Fuente:&nbsp;<a href=\"https:\/\/vallartarealestateguide.com\/mexican-taxes-for-foreigners\/\">https:\/\/vallartarealestateguide.com\/mexican-taxes-for-foreigners\/<\/a><\/p>","protected":false},"excerpt":{"rendered":"<p>With its innumerable attractions and great quality of life,&nbsp;Vallarta \u00b7 Nayarit&nbsp;is a tourist destination that attracts thousands of foreigners who come to vacation or reside for long periods. In order to respond to the high residential demand, the region has developed a strong real estate industry with an extensive inventory, the sale and rental of [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":3691,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[56,44,45],"tags":[],"post_folder":[],"class_list":["post-3690","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal-taxes","category-nayarit","category-puerto-vallarta"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - 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