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Mexico income tax on Canadian pension payments

Captnflex
#1
Hola, i am in the planning stage and looking at moving to the Lake Chapala or Colima/Manzanillo area.
My questions are about having to file an income tax in Mexico on pension payments from a Canadian source if i establish my permanent residence in Mexico.
Becoming a Canadian non resident has advantage and we will only pay 15% tax in Canada:
https://www.canada.ca/en/revenue-agency … aimer.html
but i can not find infos about Mexico income tax, what if any tax in this particular situation.
Can somebody gives me infos about this?
Thanks
See also
Texasaaa
#2
That’s a great question and could be a difference maker on whether we are able to move from the US also.  I’ll be anxiously waiting on that answer! Thanks
G
#3
Ok, my wife and I have move to Mexico fulltime late August 2017 with permanent residency status for Mexico but still Canadian citizens. We have researched the subject of income tax a year before moving.

1-Canada and Mexico have a fiscal agreement that quotes pensions are taxable to a maximum of 15%, article 17. But you can apply for article 217 (full year residency and >90% of income is pensions) and reduce the tax rate, but your tax report is manually done and has to reach Revenue Canada offices by June 30th. Note that your RRIF withdrawals above the minimum will be taxed at 23% not 15% part XIII 
http://www.fin.gc.ca/treaties-conventio … _1-eng.asp
2-for mexican tax "impuesto sobre la renta", you don't need to register with the RFC if you don't have mexican income (work,business, rental, interest, etc...), don't own property, don't have a mexican bank account. If so, you will need to  This is based on my telephone conversation with the RFC ombudsman.
http://www.prodecon.gob.mx

So, Revenu Canada allow you to keep your Canadian bank account / credit debit cards but can't keep stocks nor property nor a chalet. The best is to contact (probably 5 times in our case) Revenue Canada international services for non residents and ask questions.

Personally, we sold everything put the rest of our personal belongings in 4 suitcases, took the plane to Mexico and we're now happy and relaxed in La Peñita de Jaltemba. We use our TD debit card to get pesos the TD fees are 3$ cnd and some ATMs allow up to 14000$ pesos withdrawals Banorte.

Here's a link to the agreement USA IRS and Mexico
https://www.irs.gov/businesses/internat … -documents

La esperanza de esta información será práctica.

Buenos dias a todos, GyC.
1 member reacted to this post
travellight
#4
The Mexican bank account depends on how much is in that account.
1 member reacted to this post
Captnflex
#5
Thank you, great infos. :top:
1 member reacted to this post
rmajijic
#6
Good posts by all the posters. My partner is in exactly the same situation as a non-resident of Canada and she just pays the flat 15% which is taken off at source in Canada. Mexico does not and can not take any more as you are already paying in Canada. If you make it down to Lake Chapala, give us a shout and we will be happy to sit down and talk about it.
G
#7

travellight wrote:

The Mexican bank account depends on how much is in that account.


Hi "travellight", were could I find info on the subject. Also, what would be the advantage of having a bank account over using our canadian debit card to get pesos?

How do you get money "pesos" in the bank account unless asking my pension provider to deposit direct my pension in the mexican bank account?

The only bank in our town is Bancomer but ATMs of HSBC, BANAMEX and BANCOMER not counting the private ATMs. I think, I will go to the bank after the holidays and ask questions.

Personally, I created a Worlremit account "https://www.worldremit.com" to be able to transfer money from Canada to Azteca/Elektra bank for pickup but since my canadian bank account carry my mexican address they refused the transfer and closed the account same reply from XE "http://xe.com/xemoneytransfer/ca/"

Adios y buen dia a todos, GyC.

Captnflex
#8
Followup to Mexicogc, what is the best Canadian bank (subsidary?) for monthly transfer to a Mexico bank account (pension payment)?
As i want to establish an account with one in Canada before leaving.
Presently my account is with National bank of Canada but they have no subsidary in Mexico.
Thinking of Scotia ,TD or Royal but not sure which is best.
What about internet bank like Tangerine?
Wondering if any Cdn living in Mx are willing to share general infos/experience on this.
G
#9
Hi "Captnflex" , I am not an expert but seems that Scotia has options.

As far as TD they have only one branch in Playa del Carmen so a bit far from my area "west coast".

Adios y buen dia a todos, GyC.
travellight
#10

Captnflex wrote:

Followup to Mexicogc, what is the best Canadian bank (subsidary?) for monthly transfer to a Mexico bank account (pension payment)?
As i want to establish an account with one in Canada before leaving.
Presently my account is with National bank of Canada but they have no subsidary in Mexico.
Thinking of Scotia ,TD or Royal but not sure which is best.
What about internet bank like Tangerine?
Wondering if any Cdn living in Mx are willing to share general infos/experience on this.


I have to do business with scotia here because my car loan it with them. My experiences with them have not been good, tedious rules, poor service, and very slow bank lines. plus they are the only bank that will not accept my atm card. I would never have an account with them. They seem to not want to connect with other banks, and won't make payments easier to do unless I open an account with them. Which is not happening. Have you looked at HSBC ?

M
#11
No worries.
Mexico tax is only an issue on Mexican source income.
No Mexican reporting required on your Canadian source income.
Michael
2 members reacted to this post
M
#12
Pretty sure Scotia Bank in Mexico is just an investment by the parent Canadian  Bank of Nova Scotia - I think there is no communication between Mexico bank and Canadian bank.  However, you CAN use the ATM with your BNS card with no fee.
Michael
ezpaci
#13
If you bring 20k peso to CitiBanamex opening an account should be no problem. You can use it for local payments with their debit card. I had other MX banks, service of CiBaMx was best.
Get source $ via ATM, HSBC is most economical.
Wire transfer takes <1 week, both banks charge. Keep $, reduce currency loss over time.
Keep your CAD or USD account, use local friends address. Your name c/o. Use same for RevCa or IRS until there is a good reason to change it.
Open investment account before you move out of homeland. Once it is running your physical location has not much influence. Alternative is broker in CA and/or US. Some accept Mx residents. Fill-in W8-BEN.
C
#14
I tried having an account at Scotia Bank and Banamex. Both were fraught with issues, so I closed them. I now use a private investment bank called Actinver where I keep both US dollars and pesos. I maintain a Chase bank account in the US which receives my pension income and list my address as my mail forwarding address in the States. That same address is used for my credit card billing and home. I no longer have any property outside of Mexico and have been living here for seven years. I transfer money using  my cell phone on a www.wise.com app and get very favorable rates for exchange and minimal fees. The money appears as US dollars in my Mexican bank account in about two days and I can change it into pesos at the bank within about 24 hours whenever I need to. I can withdraw from my peso checking account at any time up to my balance. I also keep excess funds in an investment account in pesos and earn a decent income on it compared with keeping funds in a US bank checking account and getting virtually nothing.
C
#15
The app is called Wise on the App Store. Don't know why there is an issue listing a URL.
OceanBeach92107
#16

carandbiker wrote:

The app is called Wise on the App Store. Don't know why there is an issue listing a URL.


Because you are a brand new member of The forum and the algorithm will not allow you to post links immediately.

You have to have a certain amount of activity on the forum before the algorithm will allow you to post links, but even then they are subject to review.

C
#17
10-4!
1 member reacted to this post
B
#18
If you own a house in Mexico, are a non-resident of Canada and pay the 15% income tax on your Cdn based pensions do you now have to file a tax return in Mexico because you own a  house?
M
#19
Technically I think you should file Mexican tax as a resident - Mexico taxes residents on their world wide income - not just what is made in Mexico. However, my friend who is a resident doesn't file Mexican taxes - they file and pay taxes in Canada so they are actually a resident of 2 countries which is not allowed - since they have no Mexican income and a tax treaty with Canada, the Mexicans ignore the situation according to my friend.
A
#20
I got advice from "Professional Assistance Services" that I paid for through the blog Mexperience.  I was told that if I am paying taxes on my income in Canada and not making any income in Mexico I don't have to file or pay taxes in Mexico.  I assume it's because of a Canada-Mexico treaty.  I'm not living in Mexico quite yet but I read Canada will withhold a percentage of my pension income for being a non-resident but if I'm not making enough money to pay tax in Canada I can apply to get the withholding removed.  Without an application form I believe the amount withheld will be refunded after doing my personal taxes each year.... the government just doesn't want to miss out on their part.  al..
M
#21
You are in a relatively low income bracket - what if you were making over $250,000?
G
#22
Hi to all, I am a permanent resident of Mexico but still a Canadian citizen.
So here is the facts in regards to taxation:
1- the tax treaties exist to avoid double taxation and tax evasion https://www.canada.ca/en/department-fin … -2006.html
2- to avoid being a resident of 2 countries, you must declare your self as a non-resident of Canada thus being taxed based on the tax treaty between Canada and Mexico https://www.canada.ca/en/revenue-agency … anada.html
3- when leaving Canada and becoming a non-resident you might incur a tax burden as departure tax, capital gain, etc... https://www.canada.ca/en/revenue-agency … rants.html
4- being a resident of Mexico but not having any source of revenue in Mexico, not owning proprety, not owning a rental property, not having a back account, not making any interest or gain on money invested in Mexico THEN you don't need to register with SAT or RFC and produce a tax return...this was and reconfirm yearly by contacting the ombudman of the tax payer for Mexico https://www.prodecon.gob.mx/
5- if ever you need to register with SAT or RFC and summit a tax return THEN all your revenues globally (including Canada pensions) but your report them as foreign income with the amount paid to Revenue Canada and the maximum for pensions would be 15%
6- the application of article 217 of the Canadian tax law is only beneficial if you don't have any revenues in Mexico and would apply if you earn $250000 and this amount of revenues would also affect your old age pension benefits.
https://www.canada.ca/en/revenue-agency … n-217.html

Finally, I, personally, know Canadians that have the permanent resident of Mexico status but never legalized their status in Canada and they also have property, bank account and investment in Mexico, they say that since the Mexican bank withhold 30% of the interest earned they don't have to file in Mexico (not true). Also, I told them that since they filed in Canada as a resident THEN these mexican revenues should be included in the tax return for Canada BUT...they...don't react to my comments or say "I will get to that later".

Hoping these information links will help some.

Adios y buen dia a todos, GyC
2 members reacted to this post
Captnflex
#23
@mexicogc  Great post, thanks for the up to date infos
M
#24

If was a resident of Mexico and made $300,000 a year investment income, how much tax would I pay? These funds would include my Canadian pensions.

M
#25

@mexicogc  Great post. Thanks for taking the time.

My question is: If a permanent resident subsequently acquires Mexican citizenship, are they then automatically required to get a RFC and file Mexico tax returns?

Also are you saying that if an expat resident in Mexico has a Mexico bank account that earns as little as 1 pesos/yr, then they need to file a Mexico tax return?

Thanks



G
#26
For "mrpres" question: there is a problem with your quote, you can't be a non resident for Canadian taxation if you have investment revenues (stock, rentals, etc...) thus you are keeping ties with Canada (you should contact Revenue Canada). Second point, if your revenues totally are $300K in pensions than you are better paying the maximum 15% and then no need to file.

For "maurice2921" question: this should be check with a Mexican accountant. The RFC is required to open a back account any interest earned is subject to a 30% tax held also deposit might be questioned if above a certain amount. 

These questions are more specific then my personal knowledge that is why referral to the authorities is given.

Adios y buen dia a todos, GyC
Captnflex
#27
Another interresting publication for Canadians is Old age security recovery tax applies to non-residents as long as it
does not conflict with a tax treaty.
You do not have to file this return if you were a resident of one of the following regions or countries in 2021
Mexico is one of them (Page 6) .


Does it mean living in Mexico your Old age security  is not affected by the clawback regardless of you  revenu?

Anybody first hand experience about this or know a good firm that specialise in Canada income tax for non resident?
D
#28
@mexicogc 

Thank you very much for such great information !
1 member reacted to this post
D
#29
@mexicogc 

Thanks !!
Captnflex
#30
I finally found the reference in the CRA webpage

If you are a resident of a region or country that has a tax treaty with Canada, you may not have to file this return. (Old Age Security Return of Income (OASRI)

Tax treaties
Because of the terms of the tax treaty between Canada and another country or region listed below, non-resident seniors living in these countries and region do not have to file an OASRI or pay recovery tax unless they plan to move before July 1, 2023, to a country or region that is not listed below
Mexico is listed


about 60% down the page  
Captnflex
#31
This video confirm that Canadian non resident who emigrate to Mexico do not pay recovery tax  on Old Age Security payments and who are eligible.
D
#32
@Captnflex

Hi,

If you don't work in Mexico, you do not have to pay Mexican income tax.

Because there is a fiscal  agreement between Canada and Mexico You will pay 15% income tax in Canada on your pension revenues , it will be deducted directly from your monthly payment and you don't need to make any income tax report in the future.

DianeL555
M
#33
What about your investment income??? It sounds like one get residency in Mexico and if not working, one does not file taxes in Mexico and pension income is not taxed in Mexico. I assume that these people file canadian taxes and so there is no tax in Mexico. However, if one moves their investments to Mexico, taxes will be paid in Mexico and one must file Mexican taxes, not Canadian taxes. Is this correct?
Captnflex
#34
What you need to know is both Canada and Mexico will tax you on your worldwide revenu.

But because of the tax treaty between Canada and Mexico there will be no double taxation.

As a Canadian non resident of Canada who reside in Mexico, if Canada is already witholding taxes on RRSP withdrawal and investments, dividend, interest ect (held in Canada) then you do not pay Mexico tax on them.

But if you move your investments in Mexico then you pay tax in Mexico.

The link below contains good informations.

B
#35
The group seems to be split on this.

If I am a Canadian citizen and I'm a non-resident of Canada according to CRA.
I own a house in Mexico, receive a Canadian based pension and RRSP totaling $90,000 per year CDN and do not rent out my house in Mexico.

Should I be paying any income tax in Mexico? Any proof either way?
M
#36
There is withholding tax paid in Canada on your pensions and thus, no Mexican tax is required. Since your pension income is quite high, you may be subject to a slight amount of Mexican tax but you will be credited with the tax paid in Canada. Any other income will be taxed by Mexico regardless of which country it is made in.
B
#37
I found a Mexican income tax calculator. Using $82,000 Canadian and converting to 1.2 million pesos it says 27% tax overall. Subtract the 15% Canadian withholding tax so you would owe 12% to the Mex govt.
If you were a resident of Ontario your overall tax rate would be 20%. Very shocking that I would pay $5700 more tax living in Mexico.
From my research it appears any country like Panama or Costa Rica that does not tax your out of country income there are no tax treaties with the Canadian Govt. Therefore the Can govt takes 25%. Govts don't like you getting to live without paying taxes.
This is all based on Canadian sourced income like pension and RRSPs. If you sell a business and are able to move the money out of Canada without taxes being paid you can put it in the Cayman Islands and live in Panama and never pay income tax again.
M
#38
@Blackwatch
There is a tax treaty with Mexico and Canada - I know many people who have no earned income in Mexico do not file Mexican taxes even though they are residents year round - they may have 25% withheld by Canada if they don't file Mexican taxes but it could also be 15% - I don't know.
Where, exactly, would you park your money in the cayman islands? Are they really trustworthy and would they manage investment accounts for you and for what fee? Let me know if you have some insight into this. Thanks
G
#39
HI to all and namely Blackwatch and mrpres, in regards to the fiscal agreement between Canada and Mexico the article 17 parag 2 is quite specific thus the maximum payable is either 15% (subparagraph a) or less if you apply for article 217 of the Canadian tax law (subparagraph b) wich we are eligible ( reduction from 15% to 10%).
My wife and I are permanent residents of Mexico and discuss this matter with Canadian government, mexican SAT including the ombudsman and two accountants in Mexico.
They all said the fiscal agreement would apply for OAS, CPP and pensions for your employer but they also suggested that the best is to avoid having mexican income thus completing the SAT IRS return is more complex to insure the fiscal agreement is applied.
So we have decided the following:
1- no mexican bank account
2- no mexican income
3- no property - we rent an apartment
4- we withdraw pesos at ATM using our Canadian bank cards
5- no mexican credit card, we use our Canadian credit card

Fiscal agreement:
Article 17:
2 Pensions arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the State in which they arise, and according to the law of that State. However, in the case of periodic pension payments, the tax so charged shall not exceed the lesser of:

a) 15 per cent of the gross amount of the payment; and

b) the rate determined by reference to the amount of tax that the recipient of the payment would otherwise be required to pay for the year on the total amount of the periodic pension payments received by that individual in the year, if that individual were a resident of the Contracting State in which the payment arises.

Adios y buen dia a todos, GyC
1 member reacted to this post
Captnflex
#40
@mexicogc  Thanks for the great infos.
Would you share your contact on who does you income tax in Canada as a non resident? (either via private email or directly on this website). We are in the process of becoming permanent resident of Mx and we are still searching for a good accountant in Canada (who is familar with the rules for Canadian non resident for income tax but aware of the Mexico bilateral agreemnnt) to file our income tax to get refunded from the 25% to 15 % Canadian tax witheld at source).

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