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Showing posts with label mexico rental tax. Show all posts
Showing posts with label mexico rental tax. Show all posts

November 13, 2020

Mexico Taxes on Rentals - What You Must Do If You Own and Rent Proprerty in Mexico


by Linda Jones Neil, Director, the settlement company®


Internet, blog sites, expat groups and Mexican newspapers are full of information and misinformation about 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 trusts.


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


And, many foreigners have found that the best and most direct form to obtain renters for their vacation properties is through the internet…….. think VRBO, Air BnB, HomeAway and many others!   These are the tech platforms.


On June 1 of this year new procedures and regulations came into effect for these tech platforms which aids the Mexican tax authorities in the collection of taxes. Now all tech platforms must collect, and pay to the authorities, the 16% IVA tax.  This is collected from the renters on the amount charged for the rental.   For the non-residents who cannot provide a tax id number, the tech platform must retain and pay 20% of the gross rental amount to the tax collector.   


The Mexican government plans to oversee and catch up with all the tax income that slipped through the holes for so many years!


Because of the pandemic and reduced travel a whole lot of these procedural issues were set aside and not resolved.


Now with property owners looking to rent again, many questions are arising as to how to legally minimize the taxable amount on this income.


It all comes down to the owner’s immigration status.    In a nutshell:


IF YOU ARE A RESIDENT OF MEXICO:  There are two options: 


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 official receipts (facturas) 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 official receipts (facturas) 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.


Unless you are bi-lingual and familiar with tax terms it will probably be worthwhile to contract with a Mexican company to assist you in these calculations and payments, even though you are a resident.


FOR THE NON-RESIDENT.   Many owners, however, are NOT residents and, for many reasons, are not able or do not wish to become residents.  Obtaining either temporary or permanent residency is a lengthy process which involves requirements including proving sufficient MINIMUM INCOME to be self-sustaining in Mexico.  Additionally the party considering residency must commit to a MINIMUM STAY in Mexico of 180 days per annum. 


As a non-resident who rents exclusively through the tech platform a flat 20% of all income will be deducted and sent to the authorities, in addition to 16% IVA deducted from his renters as Added Value Tax.   The tech platforms must report and pay this income to the tax authorities. NO RFC or taxpayer identification number is required. No annual declaration need be filed.


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


Since each party’s situation may differ, an analysis of individual income and outgo makes sense.   A no cost and no obligation confidential consultation regarding individual circumstances, can be obtained by requesting same from the email addresses listed below.






August 16, 2018

AIRBNB TAXES IS NOW WITHHOLDING LODGING TAX FROM BAJA RENTALS - The Hacienda will collect income taxes and IVA next.


Thursday, August 16, 2018


AIRBNB TAXES IS NOW WITHHOLDING LODGING TAX FROM BAJA RENTALS - The Hacienda will collect income taxes and IVA next.

On August 6th the Gringo Gazette published an article by Doris Open regarding the impact of the Airbnb rentals in Mexico.    In Baja California Sur alone there are 2,400 owners registered with Airbnb!
    Now………all these owners renting through Airbnb will be paying the 3% lodging tax to the municipal authorities.  This will be taken out of rental income BEFORE it goes to the owner!!

   Rental owners of property in Mexico also owe Federal Income Tax Mexico and IVA Tax. Failure to pay these taxes on rental income can result in severe penalties.

    One to these two taxes is the Impuesto Sobre la Renta (ISR) is the owner’s tax on income.    The other, the Impuesto al Valor Agregado (IVA) tax is a sales tax which must be paid by the tenant but collected by the owner and delivered to the Mexican authorities.

    These taxes must be declared MONTHLY and paid each month to SAT, the federal tax authority.
    
Many tax authorities and accountants do not believe the 3% hospitality tax is an obligation of the owner of one or two units who rents only occasionally.  This issue has yet to be determined with any certainty.

    No tax expert disputes the legitimacy of the two federal Federal taxes.    With all this publicity however, federal tax authorities will be looking more closely at the Airbnb websites and will be visiting those owners to check their compliance with federal tax laws.  They have already done so in some towns located on the Mexican mainland.

    It is strongly suggested you get legal  with the Mexican tax authorities BEFORE they knock on your door!

If you have questions on IVA and Income Tax owed on your Mexican rental property either in Mexico or in the USA (if you are a US taxpayer), contact us at ddnelson@gmail.com.

To learn more about the details of these Mexican rental taxes visit www.rentaltaxmexico.com 
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The Settlement Company® has developed three options for meeting your obligations on income from rental properties located in Mexico.   For additional information; info@settlement-co.com