a crash course in Mexican taxes

by Raoul Rodríguez, CFP®, EA

Raoul Rodriguez a professional, who specializes in Mexican tax implications for residents from the three NAFTA countries, has written a document outlining obligations under Mexican tax law. Below is a list of areas covered.. To see the full article please go to: www.pinnacleadvisoryinternational.com.

 Mexican tax residents are subject to report and pay Mexican income tax on worldwide income. Paying income tax to your host country is no different than what U.S. residents (or residents from most countries of the world) are expected to do in the country where they live. Though dealing with a new tax system is definitely complex, with proper planning you might find that you actually save on taxes.

What Taxes?                                  
Here’s a brief description of the types of income subject to Mexican income tax laws as they apply to tax residents. Non-tax residents are covered under separate provisions and are not discussed here.

Mexican Tax Rates
Mexican income taxes are applied on a marginal basis and for natural persons can reach as high as 35% .

Mexican Capital Gains Taxes
Capital gains are not a preference item and are taxed at regular tax rates. There are two major exceptions: gains for the sale of Mexican registered securities and the sale of a principal residence.

Mexican Rental Income
Rental income is subject to Mexican income taxes. A blind deduction of up to 35% or certain actual deductions are allowed. The taxpayer can take the higher of those two numbers while the remainder is taxed at regular income tax rates.
More information: www.RentalTaxMexico.com .

Mexican Interest Income
Interest income is generally subject to regular income tax rates.

Mexican Dividends

Dividends were historically exempt from income tax if the corporation making the payment had paid income tax on that income to the Mexican tax authorities.

Mexican Estate Taxes
Mexico has no estate or inheritance tax applied to tax residents (non-residents that receive gratuitous transfers pay up to 25% of the value of the property received).

Mexican Gift Taxes
Mexico has no gift taxes when transfers are made between ascendants and descendants.

Other Taxes
Mexico has a series of other taxes that apply to both residents and non-residents, including:

Property Taxes (Predial): very low compared to the U.S. and varies by state and municipality
Value Added Taxes (Impuesto al Valor Agregado – IVA): 16% in all of Mexico.

Transfer taxes (Traslado de Dominio): varies by state.

Automobile Tax (Tenencia): varies by state.

About the author:

Raoul has worked as a Wealth Manager for over 20 years, including 18 years at his own firm, Mexico Advisor. He has completed many consultations with The Settlement Company® and its clients.  Raoul joined Pinnacle Advisory Group in 2016, bringing with him significant experience in planning and investment management, along with expertise in the complex issues of cross-border financial planning. In addition to being a CFP®, he has obtained a master’s degree in financial planning and is an Enrolled Agent authorized to practice before the Internal Revenue Service. Born in Mexico City, he is a graduate of a U.S. University and resides in Portand, Oregon/