Mexican taxes on US Permanent Residents

9POSTS

7 years ago

Reading these forums, it seems there is some confusion on the law concerning how Mexico taxes it's foreign permanent residents. I have read that Mexico taxes ALL worldwide income for these residents. Of course, for US citizens that set up tax advantaged investments(e.g. tax-free municipal bonds, qualified dividends, etc.) the thought of paying Mexican taxes on these would make me pay FAR higher taxes in Mexico than the US; even after a tax credit! Would my SSA payments and annuity payments get taxed also?

I have read that many(most?) US residents holding permanent residency status in Mexico just does not file taxes there. True?

Any clarifications would be appreciated.

The Mexico expat guide

Comprehensive and free

Read it now

captdave51 New member

9POSTS

7 years ago

Thank you for the information. There are sites explaining that Mexico taxes all worldwide income for permanent residents but do not really enforce it very much. Therefore, most do not file or pay Mexican taxes. Anyone out there able to confirm this?

GuestPoster1197023 Guest

0POSTS

7 years ago

Hi "captdave51", first need to clarify if you are an American resident or English resident as shown on your profile.

My wife and I are Canadians that became permanent residents of Mexico in August 2017 thus the fiscal treaty between Canada and Mexico applies avoiding double taxation but becoming a non residents of Canada implies some restrictions on our investments (no Canadian stocks, no mutual funds).
Also, to avoid having to file in Mexico, the best is not own proprety, not work, no business, not have interests on mexican bank accounts (we personally decided not to have Mexican bank account and used ATM cards to get pesos), thus no need to register with the RFC the following link identifies which revenues are subject to the requirement for registering https://satgobmx.com/rfc/ .
Secondly, you are right that when filing a Mexcan tax return, you need to identify your worldwide revenues but quote if some are from countries with a tax treaty with maximum tax level for revenues (in our case Canadian pension 15%, Canadian interest 10%).

This was verified with the "La Procuraduría de la Defensa del Contribuyente (Prodecon)"
http://www.prodecon.gob.mx and also with Revenue Canada and an accountant specialist on international taxation

In your case supposing that you are an American citizen, if I may suggest, you should:
1- contact the IRS to obtain information on becoming a non resident of the USA https://www.irs.gov https://www.irs.gov/help/contact-your-local-irs-office
2- check/read the fiscal treaty between USA and Mexico but not sure if exist you should confirm with IRS
https://www.irs.gov/individuals/interna … ing-abroad
The link is in Spanish but under the title "Compilación de tratados para evitar la doble tributación que México tiene en vigor" you will find the fiscal treaty to avoid double taxation http://omawww.sat.gob.mx/informacion_fi … cales.aspx
3- contact the PRODECON for additional information but I think they might not have English speaking personnel but you could try sending an email in english http://www.prodecon.gob.mx

Hoping the above information will help.

Finally, in our case, we are paying less taxes on our revenues then when residing in Quebec, Canada and cost of living being less = better life with less stress...ninguno regrets.

Adios y buen dia a todos, GyC.

jamesr3939 Serial expat

226POSTS

7 years ago

If you are a citizen of the US then you will pay taxes also on worldwide income with a few exceptions. The one that most people hear about is excluding foreign earned income from US taxes. Basically, you have to be outside the US for about 330 days and be paid outside the US (foreign company). Then you can exclude around $85,000 of foreign income from US taxes. I had a couple of friends who were defense contractors and they did this for several years. You still have to file with IRS and then claim the exemption. I'm not aware of declaring being a "non-resident" of the US as apparently CAN does.

There is an agreement between some countries so you don't get double taxed. I have read it and it's complicated.

I have looked at ways to avoid paying US federal taxes (state tax is pretty easy). It appears you have to renounce your US citizenship and claim foreign citizenship. Since I receive a state government pension it makes it even harder. I guess if you already held dual citizenship it might be easier. But I'm not willing to give up my US citizenship. There are two www sites that you might find of interest www.baja123.com and www. discoverbaja.com that discuss a lot of the in's and out's of being an expat in Mexico.

captdave51 New member

9POSTS

7 years ago

Thank you for the insight. I am much more concerned with the Mexican taxation than the US taxation. I am retired and my investments in stocks and bonds are tax advantaged where I pay minimal taxes. The tax credit would not really offset much of the tax from Mexico. Where I pay about an effective tax rate in the US of about 1.5% after allowances, I fear paying around 16-20% in Mexico.

jamesr3939 Serial expat

226POSTS

7 years ago

I too have US investment income I'm concerned about and it appears to me it will not be taxed or even claimed in Mexico.

captdave51 New member

9POSTS

7 years ago

From what I have read here and elsewhere, it seems that some people file in Mexico and some don't. Gov't does not seem to care too much at this time.

jamesr3939 Serial expat

226POSTS

7 years ago

In the words of Bill Clinton, "Don't ask, don't tell."

travellight VIP Member

2460POSTS

7 years ago

#10

captdave51 wrote:
From what I have read here and elsewhere, it seems that some people file in Mexico and some don't. Gov't does not seem to care too much at this time.

I don't know where you get your information dave. But if you actually owed money and didn't pay you would find out pretty quickly how much the country cares where money is involved. I don't know why anyone would file if it's not required, but Mexico might ignore that.

The filing is one of the reasons businesses offer facturas or receipts. I always ask for receipts because I am not a business so I don't need facturas. If you were a business buying things here you would want a factura to use when filing. If you own a house here you should look into housing tax which is pretty reasonable. If you don't own a house, a business or have a job here you do not owe taxes.

I really think you need a tax accountant to help you clarify your thinking.

jamesr3939 Serial expat

226POSTS

7 years ago

#11

I agree with "travellight". Since we are buying property I fully understand I will owe property tax once a year. Good thing is Mexico wants their money upfront. So taxes at the front end are pretty high compared to US. However, annually after is "dirt cheap" and there is a huge discount for paying early, which I plan to do.

1 member reacted to this post

GuestPoster1197023 Guest

0POSTS

7 years ago

#12

Hi to all, I found a few link that could help and like "travellight" said a discussion with an accountant could help. These links are from Price Waterhouse

http://taxsummaries.pwc.com/ID/Mexico-I … -Residence http://taxsummaries.pwc.com/ID/Mexico-I … nistration http://taxsummaries.pwc.com/ID/Mexico-I … ermination

Adios y buen dia a todos, GyC.

captdave51 New member

9POSTS

7 years ago

#13

Thanks, Mexicogc for those links. I'm starting to understand the logic in sometimes not having to necessarily file in Mexico!

alleycat1 Serial expat

352POSTS

7 years ago

#14

jamesr3939 wrote:
I agree with "travellight". Since we are buying property I fully understand I will owe property tax once a year. Good thing is Mexico wants their money upfront. So taxes at the front end are pretty high compared to US. However, annually after is "dirt cheap" and there is a huge discount for paying early, which I plan to do.

Those are not "taxes up at the front" when purchasing a house in the restricted zone but a fee for being a non citizen the federal government collects one time for allowing you to own there. They want to document you and your property. The annual maintenance fees and the banks service fee when setting up
the bank trust is not sent to the federal government. The federal govermment charge x amount for the peso value of the property. Municipalities charge property taxes based on peso value when bought of the house and usually don't reappraise it's value except in a few certain municipalities; for example Chapala Jalisco and Cuernavaca Morelos where there is an above average amount of much larger homes than is the norm.

Markenzee Member

22POSTS

6 years ago

#15

Captjack: Travellight is correct. “It's pretty simple for U.S. citizens Dave. IF You have a business in Mexico or work in Mexico you pay taxes in Mexico. You have no income in Mexico you don't have taxes in Mexico. Most of us do not file or pay taxes here because we have no income in Mexico so we are not required to.”

Those other postS regarding paying taxes on Worldwide income in Mexico are flat out wrong. That is true in most countries, but not in Mexico. They like retirees that bring their dollars to spend in Mexico.

Rdc4 Member

11POSTS

5 years ago

#16

Markenzee wrote:
Captjack: Travellight is correct. “It's pretty simple for U.S. citizens Dave. IF You have a business in Mexico or work in Mexico you pay taxes in Mexico. You have no income in Mexico you don't have taxes in Mexico. Most of us do not file or pay taxes here because we have no income in Mexico so we are not required to.”

Those other postS regarding paying taxes on Worldwide income in Mexico are flat out wrong. That is true in most countries, but not in Mexico. They like retirees that bring their dollars to spend in Mexico.

I know this is an older post but I’m considering retiring to Mexico and trying to get a definitive answer on whether a American citizen with permanent residence in Mexico has to pay taxes on income earned outside of Mexico. From what I have read Americans with a permanent residence in Mexico ARE required to pay taxes to Mexico on worldwide income earned outside of the USA. Please read the following links:

https://www.greenbacktaxservices.com/bl … ng-mexico/https://www.escapeartist.com/blog/taxat … in-mexico/

Please tell me where you received information that worldwide income is not taxed by Mexico? Just because people aren’t filing taxes with Mexico doesnt mean it is correct.

GuestPoster1197023 Guest

0POSTS

5 years ago

#17

If I rent a room in my house through airbnb, can I just pay taxes on the revenue to the US (since airbnb is an american company?) It seems like a lot of Americans are renting on airbnb and not declaring it to Mexico....

Markenzee Member

22POSTS

5 years ago

#18

I know a dozen people living in Mexico and they pay no tax in Mexico except on rental income in Mexico. All of these people collect SS and also collect some dollars from their retirement accounts, but it remains so insignificant that those returns do not require paying Mexican taxes. If you make 100s of thousands of dollars on investment income annually, that is quite different.