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The taxation system in Mexico

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Mexico has a quite straightforward tax system. Here is all that you need to know about taxation if you're about to move to Mexico.

Income tax

Paying income tax is fairly straightforward in Mexico. Taxes are automatically deducted from your paycheck. Unless you make more than 400,000 pesos (USD $21,500) a year, you don’t have to file any tax statement or do any paperwork whatsoever. In fact, at most companies, you won’t even receive your yearly tax statement unless you specifically ask for it.

The only reason to declare your taxes is if you plan on making deductions for business expenses. This usually does not apply to average workers, but to business owners or the self-employed. To make these deductions, you will need to collect and provide official receipts called facturas. For specific information about these declarations, it is a good idea to visit a Mexican accountant.

Sales tax

Sales tax in Mexico is set at 16% as of early 2018. In Spanish, it is IVA, or impuesto al valor agregado, in English “value-added tax.” It is nearly always included in the price, not added on later like in the U.S. Some restaurants in tourist areas, however, do add this tax at the end. There’s not much you can do about this except to be prepared to pay slightly more than the price shown since the total amount only shows up at the end.

Paying tax in your home country

Most countries have a reciprocal tax agreement with Mexico, which means that because you’ve already paid Mexican taxes on your Mexican income, you don’t have to pay taxes in your home country.

An exception to this is the United States. All U.S. citizens living abroad must continue to file taxes and declare their foreign earned income. If your earnings were less than $102,100 USD in 2017 (the Foreign Earned Income Exclusion), you do not have to pay taxes on the income, but you do have to declare it.

For specific information about filing taxes as a foreign resident, especially if you are self-employed or have income from various countries, it is a good idea to consult an accountant in your home country.

 Useful links:

Tax refund for foreign tourists
Mexican Institute of Public Accountants
IRS, U.S. foreign earned income exclusion

We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
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Member since 01 June 2008
Small earth, Mauritius
1 Comment
quemex
quemex
3 years ago

This does not reflect useful information for retired Canadians residents of Mexico who do not have any income from Mexico (only live on their Canadian pension). That is my case. My Canadian pensions (Public Service Pension, Canada Pension Plan, and Old Age Security Pension) are all deposited directly into my Canadian bank account (I also have a Mexican bank account for local use to which I transfer funds once in a while). The 15% Canadian federal income tax required by the Canada-Mexico Agreement is taken at the source for all my pensions, so the amounts deposited each month in my Canadian bank account are "net". So, as my non resident taxes to Canada have been paid before pension deposits, and I have no income in Mexico, I have no more income tax reports to file, neither to Canada, nor to Mexico. And, by the way, the 15% non resident Canadian federal income tax I pay under the Canada-Mexico Fiscal Agreement is less than half than what I would pay in federal and provincial taxes in my Province of origin if I still lived there !!

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