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Mexican taxation for Canadian permanent residents in Mexico

G
#1
I am currently living in Canada (Canadian citizen).  I would like to seek permanent residence in Mexico.  I am retired so do not plan to work/earn revenues while being in Mexico, except using my pension from abroad.  This pension is coming from Canada and Switzerland.
For the Canadian pension, I will continue to pay taxes to Canadian government (for revenues earned in Canada) (about 35% taxes). 
But regarding my Swiss pension, the income tax from Switzerland is automatically withdrawn from the amount received (10%).  Will it be subjected to Mexican taxes even if it comes from abroad ?
See also
wgregg12354
#2
I can’t comment on this much, but it seems to me that passive income wouldn’t be taxed by Mexico.

The only other thing that I wanted to add is that your 10% tax withdrawal from Switzerland may only be what is called a “tax withheld at source” type of thing.  In other words, you might have to still report on you Swiss taxes as income and then use the 10% withdrawal as a tax credit on the return.   Again, not sure if that is the case, but that’s what we have to do here in for U.S. taxes.
D
#3
Hola,

I am in the same situation as yours, except I am fully Canadian.

Regarding income tax, Canada authorize a 15% income tax directly deducted from your canadian pension because there is a fiscal  agreement between Canada and Mexico. But you MUST declare yourself as a NON-RESIDENT of Canada. Otherwise, you will need to make your income tax report in Canada and pay taxes like a canadian resident (20-30-40%...) according to your level of income.

When this is all set, you don't need to make further income tax report in Canada.
You need to make a mexican income tax report only if you earn revenue in Mexico.

Some interesting links:
https://www.canada.ca/fr/agence-revenu/ … dence.html

see form:  https://www.canada.ca/fr/agence-revenu/ … s/nr5.html

Additional information on canada.ca

Diane555L
G
#4
Thanks for your comment.  But I need some clarification : As a Canadian non-resident, Should I pay canadian taxes only  to the Federal ? or both the Federal and the Provincial (even if I am no longer resident in any canadian province ?
M
#5
Mexicos taxes on worldwide income but they have a tax treaty with Canada so you don't get double taxed - don't know about Switzerland but if there is not a treaty, Mexico will tax you. Pretty sure this is correct.
Launia Tate Sullivan
#6
As  a retiree, you need to apply for a resident visa or a permanent visa at Consulate of Mexico.  You will not have to pay taxes on foreign retirement.
SAT is the name of the Mex tax department.
The financial requirements have increased in 2022 and each consulate have different requirements (I know odd). You can find a lot of valuable info from Sonia Diaz who has high reputation.
***
I am myself a retiree in Mex since 2006
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Launia Tate Sullivan
#7
We are speaking here of retirees.  Not active business people.
Foreign Retirees in Mex do not pay taxes: as of feb 2022.  Of course things can change. But I doubt for that subject.
G
#8
Thanks Launia for your message.
I found in a facebook group named Expats to Yucatan a lot of contradictory information on whether or not non-Mexican citizens in Mexico retirees are paying taxes in Mexico as permanent residents, and this confused me a lot.  Now you are assuming that there is a very recent agreement (2022) which state that retirees will no pay taxes.  As I do not want to be desillusioned again on this subject, if you have any link on official information on this, I would be grateful if you could give me the links.
OceanBeach92107
#9

Launia Tate Sullivan wrote:

As  a retiree, you need to apply for a resident visa or a permanent visa at Consulate of Mexico.  You will not have to pay taxes on foreign retirement.
SAT is the name of the Mex tax department.
The financial requirements have increased in 2022 and each consulate have different requirements (I know odd). You can find a lot of valuable info from Sonia Diaz who has high reputation.
(LINK REMOVED)
I am myself a retiree in Mex since 2006


Launia Tate Sullivan wrote:

We are speaking here of retirees.  Not active business people.
Foreign Retirees in Mex do not pay taxes: as of feb 2022.  Of course things can change. But I doubt for that subject.


gfdcanada wrote:

Thanks Launia for your message.
I found in a face.book group named Expats to Yucatan a lot of contradictory information on whether or not non-Mexican citizens in Mexico retirees are paying taxes in Mexico as permanent residents, and this confused me a lot.  Now you are assuming that there is a very recent agreement (2022) which state that retirees will no pay taxes.  As I do not want to be desillusioned again on this subject, if you have any link on official information on this, I would be grateful if you could give me the links.


I agree, gfdcanada, an OFFICIAL government link would be good.

Launia, If "Sonia Diaz" wants to list her business in the MEXICO BUSINESSES DIRECTORY (she might already be listed) that's acceptable under the forum code of conduct.

Direct promotion of individual businesses with live links in the forum is normally not allowed.

1 member reacted to this post
B
#10
I believe any official link will be in Spanish from a Mexican govt site. I have researched this on and off for a few years now. Spoken with accountants and retirement planning specialists. They all say if your income is not from a Mexican source you do not file or pay IC tax in Mexico. If you rent out your house while not there then you must file a tax return.
My pension and RRSP withdrawals will attract approximately 27% IC tax in Canada and are both Canadian sourced. If I move to Mexico they will be taxed at source by CRA at 15%. I have to file form NR73 then file form NR5 to reduce the withholding from 25%to 15%. That's it, no other deductions or taxes to be paid.
I would save $1000-$1500/month in taxes by moving to Mexico depending on my RRSP draw down schedule.
It isn't hard to become a non-resident for tax purposes. Some have kept their home in Canada and rented it out but you might have an appeal to file in this case. Pretty much sell your property (House, car, furniture) get a Mexican driver's license, cell and bank acct and spend the majority of your time in Mexico.
You can return to Canada for vacations etc but if you exceed 183 days in one year CRA can deem you to be a resident of Canada again.
2 members reacted to this post
M
#11
So a Canadian can obtain Mexican residence visa, move to Mexico and not file Mexican taxes if you make no money in Mexico. Your registered accounts remain in Canada and you pay between 15 and 25% withholding tax in Canada. What about your investment accounts?? What do you do with them - If you leave them in Canada you will be taxed so where do these accounts go if you are living in Mexico? Thanks
M
#12
have a look on this

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

If you’re a resident of Mexico, income earned in a foreign corporation or from work performed outside of Mexico is taxable in Mexico. As a resident, you’re taxed on your worldwide income no matter where earned. If you paid foreign taxes on that foreign-sourced income, you will receive a tax credit.

Likewise, you’ll pay Mexican tax on any capital gains or passive income earned abroad. A foreign tax credit is available to eliminate double taxation.

If you’re not a resident of Mexico, you’ll only pay tax on your Mexican sourced income. For example, you’re living in the U.S. and work 30 days in Mexico for a Mexican corporation. This income is a Mexican source and taxable in Mexico.

That is to say, any personal service rendered in Mexico generates Mexican sourced income and is thus taxable in the country.

Non-residents pay 15% or 30% tax on their Mexican sourced income. The first MXN 125,901 (USD $7,000) is exempt in most cases.
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D
#13
As a non-resident of Canada, you pay only 15% of income tax on your pension revenues and investments in Canada.
You must declare yourself as a non resident to Revenu Canada, sell your belongings (house, car, etc)  and  ask your investment or pension fund manager to deduct 15% from your revenues. they must inform Revenue Canada .
Once done you don't need to make income tax report any more.
1 member reacted to this post
G
#14
Thanks DianeL555
B
#15
This is very confusing. Most articles and tax people say Mexico does not tax on income that is sourced from another country. But it sounds like each Mexican state charges income tax regardless but only 1-3%.
So if a Canadian buys a home in Tulum, is a non-resident of Canada and has an income of $100,000 Canadian that is all from Canada (Cpp, OAS, work pension and RRSPs) they pay 15% at source in Canada.

Does anyone know what you would pay in Mexico?

https://www.greenbacktaxservices.com/bl … ng-mexico/

"Nonresidents are taxed on Mexican-sourced income only. Expatriates also pay local taxes to their state in Mexico. These rates are different in each state and generally range from 1% to 3%."
G
#16
Hello,
What you say about Mexican taxation that foreigners do not pay taxes to Mexico is only true for visitors but this is not true for permanent residents in Mexico.  So please be more specific in your statement so as to avoid misunderstandings.
The official rules on the Mexican side is that foreigners with permanent residence status have to pay taxes on all their revenues, including revenues generated outside of Mexico, to the same extent as the Mexican citizens do.
However, the agreement for non double taxation between Mexico and many foreign countries including Canada, implies that, if the tax rate on revenues is, says, 30% in Mexico, the Mexican fiscal department will charge you only 15% on your Canadian revenues instead of 30% since Canada already retains 15%.
G
#17
This is not true!  Please read my note written today.  Permanent residents have to pay taxes to Mexican Authorities for revenues generated from foreign countries.
D
#18
I am quite sure that you only need to pay federal income tax , you don't need to pay provincial tax.
DianeL555
OceanBeach92107
#19

DianeL555 wrote:

I am quite sure that you only need to pay federal income tax , you don't need to pay provincial tax.
DianeL555


Finally!

An authoritative answer...

1 member reacted to this post
G
#20
You need to sell your house in any Canadian province and have no real estate properties in that province in order to no longer pay taxes to that province.  However, I am not quite sure about what happens if you have a secondary home in that province.
M
#21
I get that pension etc riff income made in Canada has a withholding tax of 15% if you are a non-resident of Canada but a resident of Mexico. However, what about investment income - If made in Mexico, one pays tax on capital gains / interest earned. Where should you leave you investment money - Canada will tax you to death - so where do I put my investment account - what country.
SallyO420
#22
Not sure if the US is different but we came from Phila to Mexico 3.5 years. We are also retired and to get our Permanent Residency we had to have a certain amount of money in the bank to live and can't work in Mexico. Our Mexican lawyer took care of it all and we have our Permanent Residency now. My husband does some minor consulting work for a colleague in the US and he does pay American taxes but nothing in Mexico. We do not fill out any tax forms here. We also have investments in the US and collect money from them which we also don't involve Mexico. From what I understand, if you are still working or make money you will not be able to get a Permanent Residency only a Temporary Residency and I think it would take 10 years to get your Permanent Residency. I would get a good Mexican lawyer to check it out. We are in Baja and have a very good lawyer here and I can give you his name and number if you want. He speaks English. We had him do all our paperwork before we got here especially since we bought a house here.
M
#23
hello, when you say you can't work in mexico, can you open a company and work as a freelance ?
M
#24
HI Sally - the name and number of your lawyer would be appreciated. We are a retired couple with no thoughts of working in Mexico or elsewhere. We are looking for a complex or gated community of expats where one can get sociability easily and has a heated community pool. We want to winter in Mexico now so only need a temporary residency which would allow us to buy a car in Mexico. Place doesn't need to be on a beach just close to beach and shopping etc. Tell me about the home that you purchased - what set it apart. Thanks
Captnflex
#25
Lots of good informations on this link for Canadian becoming non resident of Canada

https://ca.rbcwealthmanagement.com/docu … 1c40dc4307

There are certain types of property that are exempt from the Canadian deemed disposition rules including:
● Canadian real estate
● Assets in registered plans (e.g., RRSP, RRIF, RESP, registered pension plans)
● Assets in a Tax-Free Savings Account (TFSA)
● Employee stock options
● Interest in life insurance policies
other than segregated funds

For many countries that have a tax treaty with Canada, withdrawals from a RRIF may be subject to a reduced 15% non-resident withholding tax only if payments from the RRIF during a calendar year are less than the greater of:
1. Twice the minimum withdrawal required for the year; and
2. 10% of the fair market value of the RRIF at the beginning of the year.
1 member reacted to this post
Captnflex
#26
This link is for Canada revenu agency listing differents type of investissements in Canada for non residents and the % of tax to be paid.
For example you are now resident of Mexico bur hold Canadians banks stock paying dividents according to this you will pay 15%

https://www.canada.ca/en/revenue-agency … aimer.html

Note i am not a tax expert…
SallyO420
#27
We are in a beautiful gated community with mostly expats. We have a gorgeous home that overlooks the ocean and we paid $275 for it. People from San Diego said it would sell for $3-4 million in San Diego. We are in North Baja, right below the San Diego border. We are using our US car with US license plates. You can have American cars here and also in Ensenada where there are a lot of Expats. It is much harder to do farther into Mexico so buying a Mexican car is probably easier. We haven't had to learn Spanish because most Mexicans speak English here or we use Google Translate on our phone otherwise. If you move deeper into Mexico, that may not be the case. I like this area because it is easy to access San Diego Hospitals where we use our Medicare. We do not have tropical weather but it is arid with no humidity and the weather makes this like Paradise, especially since we moved from Philly 3.5 years ago and LOVE it. The fall, summer and spring are gorgeous and usually around 75 all the time. The winter can go down in the 60's but most people do not have air conditioning or heating. Our lawyer is Fernando***. He did all our paperwork when we moved here and did a great job. Make sure you get a Sentri or Global Entry for the border so you don't sit in 4 hours lines is you want to go back to the US. Wish we did this 20 years ago!
Moderated by Cheryl 4 years ago
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We invite you to read the forum code of conduct
1 member reacted to this post
B
#28
Thanks for the clarification. It sounded like Mexico does not tax foreign sourced income if you move there but this must mean temporary residents like snow birds who stay 5-6 months but still reside in Canada. It is cheaper to remain a resident of Canada as Mexico has a higher tax rate for someone in my situation.
G
#29
Yes.  I found it out.
SallyO420
#30
Maybe Canada is different, but my husband and I retired to Mexico 3.5 years ago. We are permanent residents and my husband still does consulting work in the US via computer. We pay taxes to the US but not to Mexico and it is not required for us. We own a home in Mexico and just pay property tax which is $70 a year.
G
#31
It may depend on the taxation level you pay in the US.  Normally, the tax rates in Mexico is around 30%.  If you already pay 30% taxes to the US, you would not need to pay taxes to Mexico.  But the Canadian situation is different.  Since the tax rate in Canada is 15% and the rate in Mexico is 30%, Canadians will have to pay 15% taxes to Mexico instead of 30%, in accordance with the double taxation avoidance agreement signed between Canada and Mexico.
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Captnflex
#32
Thanks for the great infos.
Something worth looking into:
https://www.canada.ca/en/revenue-agency … sri.html#c
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 one of them.
My interpratation if you are non resident of Canada and reside in Mexico you will not be subject to the old age security (OAS) clawback.
G
#33
Just wondering if you still have  contact info for a good immigration lawyer in MX?



Thanks ;)
Captnflex
#34

We are speaking here of retirees.  Not active business people.
Foreign Retirees in Mex do not pay taxes: as of feb 2022.  Of course things can change. But I doubt for that subject.

- @Launia Tate Sullivan

Hi Launia, do you have a reference about ''Foreign Retirees in Mex do not pay taxes''
I am in the planning stage to  get a permanent residence visa in Mexico and fiscal obligation in Mx will weight in heavily.

The source below indicate that resident are liable to pay tax in Mexico (but get credited for tax witheld at source) and would like to have a good reference  saying the opposit.

Individual - Taxes on personal income
Last reviewed - 02 March 2022
Resident individuals are subject to Mexican income tax on their worldwide income, regardless of their nationality.

Non-residents, including Mexican citizens who can prove residence for tax purposes in a foreign country, are taxed only on their Mexican-source income.

source taxsummaries.pwc.com/mexico/individual/taxes-on-personal-income
Captnflex
#35

I came across this website

https://www.globalpassport.ai/blog/domi … e-to-taxes

explaining the Dominican Republic taxation for revenue outside the DR territory not being taxed.

But for Canadian non resident Cdn pension tax witholding at source is 18% vs 15% in Mx  but exempt of DR tax.


The Dominican Republic follows a territorial concept for the determination of taxable income. Dominican-source income is subject to tax, while foreign-source income is generally not. However, residents are subject to taxation on foreign investments and financial gains. In the case of individuals who become residents, this foreign-source income is taxed only after the third year

source:  https://taxsummaries.pwc.com/dominican- … nal-income

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