TAX OBLIGATIONS FOR FOREIGNERS IN MEXICO

Whether a property owner or just the occasional visitor on a beautiful beach in Mexico, everyone pays taxes, natives and foreigners. Some of the taxes are hidden and others are not.

The purpose of this article is to touch on some of the important taxes levied and paid in Mexico.

The Mexican organism that collects taxes is The SAT (Servicio de Administracion Tributaria), also known as Hacienda, is the federal tax collector. It collects all federal taxes such as the ISR (Income or Capital Gains) tax, the IVA (Added Value) tax, the IDE (Tax on Cash Deposits) and the IEPS (Special Tax on Production and Services). Each state government has its own taxes such as the 2 to 3 percent tax on lodgings and tourism. The municipal governments assess and levy taxes on real and personal properties.

Hacienda is paying more attention to internet advertising and is beginning to inquire into the income  of  those  who  are  renting  their  homes. It makes  sense  to  become  legal  since penalties  for  non-compliance  can  be  considerable. Methods  one  and  two  above  require  the RFC  (taxpayer  identification  number)  which  can  be  challenging  for  a  foreigner  to  obtain.   Method three outlined above does not require residency or official status.

It is important to understand the difference between Tax Resident and Non-resident for tax purposes. The Tax Resident is the person, citizen or non-citizen, who has acquired his Federal Taxpayer Identification Number and who files and declares taxes in Mexico on his world-wide income. Any party receiving income from Mexican sources, such as from rental or from the sale of real properties, or from business activities, is required to file. No distinction is made between citizens of Mexico and non-citizens as to tax rates