{"id":39879,"date":"2017-08-22T05:53:12","date_gmt":"2017-08-22T09:53:12","guid":{"rendered":"https:\/\/www.escapeartist.com\/?p=39879"},"modified":"2021-03-01T15:34:16","modified_gmt":"2021-03-01T20:34:16","slug":"taxation-of-expats-living-in-mexico","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/taxation-of-expats-living-in-mexico\/","title":{"rendered":"Taxation Of Expats Living In Mexico"},"content":{"rendered":"
Mexico has become one of the more aggressive countries in Latin American when it comes to taxing its residents. Mexico taxes residents on their worldwide income<\/a>. If you\u2019re living and working in Mexico, the government wants its cut. Here\u2019s a summary of the taxation of expats in Mexico. <\/span><\/p>\n Many of our clients in Mexico are audited each and every year by the SAT (known as Hacienda). This agency is very happy to deny any and all expenses of a business that are not documented or are paid to a tax haven<\/a> country. If you\u2019re a gringo or European, expect the Mexican SAT to be even more hostile. <\/span><\/p>\n For example, one of our clients is a large real estate developer in Mexico. They buy all kinds of products from around the world. <\/span><\/p>\n They\u2019re unable to buy from Panama because payments to Panamanian corporations are not being allowed as deductions by their auditor. This forces them to buy from the United States at a higher cost. All expenses paid to high tax countries are allowed while payments to low tax countries are denied. <\/span><\/p>\n Expert Tip<\/strong>:<\/span> If you have operations in Panama and Mexico, income should go into Panama and <\/span>Mexico should bill the Panama corporation for services rendered<\/span>. If income goes into Mexico, the SAT can deny the corresponding deduction when you make a transfer to Panama. If income goes to Panama, Mexico has nothing to say about the inbound transfer. Handpicked Related Content: Offshore Tax Planning – The Need Of The Hour<\/strong><\/em><\/a><\/p>\n <\/p>\n Keep in mind that <\/span>this article is intended for expats living in Mexico<\/a><\/span>, not Mexican nationals. The laws for citizens are different than for foreigners. <\/span><\/p>\n <\/p>\n Mexico taxes expat residents on their worldwide income. In most cases, you\u2019re a resident for tax purposes if Mexico is your primary home (your home base) and you spend more than 183 days in the country. <\/span><\/p>\n It\u2019s also possible to be classified as a resident if you spend less than 183 days a year in Mexico. If SAT believes Mexico is your \u201ccenter of vital interests\u201d, they will classify you as a resident for tax purposes. <\/span><\/p>\n Mexico might be your center of vital interests if:<\/span><\/p>\n These are the two primary tests for vital interests. An auditor may also consider the total facts and circumstances and find you to be a resident if neither of the above is true. <\/span><\/p>\n In most cases, if you\u2019re living and working in Mexico for an entire year, you\u2019re a tax resident. Also, any income earned for work performed in Mexico is taxable in Mexico. <\/span><\/p>\n If you’re a resident of Mexico, income earned in a foreign corporation or from work performed outside of Mexico is taxable in Mexico. <\/span>As a resident, you\u2019re taxed on your worldwide income no matter where earned<\/b>. If you paid foreign taxes on that foreign-sourced income, you will receive a tax credit. <\/span><\/p>\n Likewise, you\u2019ll pay Mexican tax on any capital gains or passive income earned abroad. A foreign tax credit is available to eliminate double taxation. <\/span><\/p>\n If you\u2019re not a resident of Mexico, you\u2019ll only pay tax on your Mexican sourced income. For example, you\u2019re 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. <\/span><\/p>\n That is to say, any personal service rendered in Mexico generates Mexican sourced income and is thus taxable in the country. <\/span><\/p>\n 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.<\/span><\/p>\n Here are the personal tax rates for residents of Mexico. \u00a0<\/span><\/p>\n <\/p>\n
\n<\/span><\/p>\nTaxes On Expats
\n<\/b><\/h2>\nDo You Have To Pay Taxes?<\/strong><\/h3>\n
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Mexico Personal Annual Tax Rates 2020 (MXN)<\/b><\/h3>\n