As with other countries the Mexican government expects nationals and foreigners alike to pay taxes on income in the country. Failure to do so can and has led to substantial actions and penalties. Even if the funds are received outside the country they are still subject to taxes here, because the income was generated in this country.
Below are two key questions with answers:
How can I pay these taxes as a nonresident of Mexico on my income from my Mexican real property?
If you are a tax resident of Mexico you can use your resident tax ID number and you have your Mexican accountant use your taxpayer identification number (RFC) to file and pay these taxes. However, if you are a nonresident of Mexico it is necessary to contact a Mexican professional or Organization (such as the Settlement Company) to file and pay these taxes. The Settlement Company in Baja Sur Mexico has developed legal method where these taxes can be paid by nonresidents.
How are these taxes treated on my US tax return?
You must report your rental income and expenses on your US tax return on Schedule E (if you are an individual taxpayer). A Mexican rental is treated the same as US rental in most respects. You can as a rental expense deduct the IVA tax and local lodging taxes. You can claim the Mexican income tax paid on your rental income as credit directly offsetting your US tax on the same rental income dollar for dollar. This is because Mexico has tax treaties with more than 30 countries, including the U.S.A. and Canada. You do not get double taxed on your US or Canadian tax return
Learn more about rental taxes in Mexico and how to pay them at: www.rentaltaxmexico.com ---or ---Email us for more information firstname.lastname@example.org email@example.com
THE SETTLEMENT COMPANY®