PAYING TAX IN MEXICO; RENTAL INCOME

As of February 2010, SAT eliminated the requirement for a taxpayer identification number (RFC) which had previously been obtained only through extreme efforts, now the foreign taxpayer has two options:

One to obtain the taxpayer identification number (RFC), file monthly declarations whether there is income or not, and enjoy a deduction of expenses. This is Option One.

Option Two provides for the taxpayer to make a declaration when income is received, pay a flat tax and obtain a receipt to take to the tax authorities in his/her tax residence, for credit or deduction of taxes in the home country.

Experts in the field like public accountants reports the following regarding tax treatment for U.S. taxpayers:

●If the Mexican rental property owned in an individuals name or through a Fideicomiso, all rental income and expenses are reported on Schedule E of the form 1040.

●Allowable rental expenses are the same as for a US property.

●Management fees, interest, property taxes, utilities, repairs, maintenance, association dues, insurance...ALL are deductible!

●Depreciation on a Mexican property is 40 years straight line

●Taxpayer can take a Foreign Tax Credit against the US income tax paid on the net rental income for income taxes paid in Mexico on that income.

●IVA (addedvalue tax) collected from the renter must be included in rental income, but then deducted out so no double taxation.