GOT QUESTIONS?
Mexico Tax FAQ for Expats
Everything you need to know about taxes and compliance in Mexico
Do I need to pay taxes in Mexico as a foreigner?
Yes, if you are a tax resident of Mexico or generate income from Mexican sources, you must file and pay taxes. Mexico taxes residents on their worldwide income. Non-residents are taxed only on Mexican-source income, such as rental earnings from property in Mexico or income from a Mexican business.
What is an RFC and do I need one?
The RFC (Registro Federal de Contribuyentes) is your Mexican tax ID number. You need it to file taxes, open a business, issue invoices (facturas), deduct expenses, or conduct most financial activities in Mexico. Every foreigner earning income or conducting business in Mexico needs an RFC. We handle the entire registration process for our clients.
How are Airbnb and property rental earnings taxed in Mexico?
Rental income in Mexico is subject to Income Tax (ISR) and, in some cases, Value Added Tax (IVA) at 16%. If you rent through platforms like Airbnb, they may withhold taxes automatically on your behalf. However, you are still responsible for filing monthly declarations and annual returns. Proper deductible expenses can significantly reduce your tax burden.
Do I pay taxes in both the US and Mexico?
Mexico and the United States have a tax treaty to avoid double taxation. If you pay income tax in Mexico, you can generally claim a foreign tax credit on your US tax return for the same income. The treaty also provides rules for determining your tax residency status and which country has the primary right to tax different types of income.
What is a factura and why does it matter?
A factura is an electronically stamped invoice (CFDI) recognized by the Mexican tax authority (SAT). Without facturas, business expenses cannot be deducted for tax purposes. Facturas are required for all commercial transactions in Mexico and must be issued through the SAT-approved system. They serve as official supporting documents for your income and expenses.
Can I start a business in Mexico as a foreigner?
Yes, foreigners can start a business in Mexico. Common corporate structures include the S.A. de C.V. (similar to a corporation) and S. de R.L. de C.V. (similar to an LLC). Foreign shareholders are permitted, though certain activities may require approval from the Mexican Foreign Investment Commission. We can guide you through the incorporation process and ongoing compliance requirements.
What happens if I do not file taxes in Mexico?
Failure to file taxes in Mexico can result in penalties including fines, interest charges on unpaid taxes, and in serious cases, criminal liability. The SAT (Mexican tax authority) has become increasingly strict with enforcement, including bank account freezes and audits.
Can you help me get an RFC as a foreigner?
Absolutely. We handle the entire RFC registration process with the SAT on your behalf. This includes preparing the required documentation, submitting the application, and obtaining your tax ID. We also help you choose the correct tax regime based on your specific activities and circumstances in Mexico.
What taxes apply to property purchases in Mexico?
When purchasing property in Mexico, buyers typically pay ISAI (property transfer tax), notary fees, and public registry costs. In some cases, IVA (16%) may apply to certain transactions. Ongoing property taxes include annual property tax (predial) and, if the property generates rental income, ISR and IVA on that income. Our team can help you understand the full tax implications before you buy.
What tax regime should I register under as a foreigner?
The right tax regime depends on your activities. Most expats generating income in Mexico register under "Régimen de Actividades Empresariales y Profesionales" (business/professional activities) or "Régimen de Arrendamiento" (rental income). Salaried employees register under "Régimen de Sueldos y Salarios." Our consultation will help determine the optimal regime for your situation.
Can I deduct expenses as an expat taxpayer in Mexico?
Yes, you can deduct legitimate business expenses provided you have valid facturas (CFDIs) to support them. Common deductions include professional fees, office expenses, equipment, travel related to your business, and certain utilities. Personal deductions such as medical expenses, education, and charitable donations may also be available under specific limits.
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