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Friday, April 24, 2015

Mexico's New Tax Laws on Real Estate Purchases and Improvements

By Cheryl T. Miller, Broker, Baja Realty and Invesment

A few years ago, the Mexican IRS, known as the Hacienda or SAT, made sweeping changes in their tax system.  The system they created became geared to electronic filings and the use of computers/internet for all acceptable documents, reports and files. Since then, many changes have occurred.  Among them is the requirement for all taxpayers to have electronic signatures, an RFC or Taxpayer ID number, to pay all taxes through the internet (cash at a bank is no longer allowed), to receive electronic official receipts for purchases of goods and services in order for them to be allowed as possible deductions from  income tax or capital gains tax, when a property is sold.. 

​This past July another change, without pomp, circumstance or notification, was passed that became effective September 1st of this year.  This change affects ALL real estate purchases, and ALL buyers and sellers who are foreign or national. READ MORE

Tuesday, April 7, 2015

Individual Tax Rules Including Allowable Deductions to Use on your Mexican tax filings for 2014

In the prior post we included a graphic showing the various rules in spanish which apply to your Mexican individual tax return for 2014.  It appears many of our friends and clients in Mexico are not that good with Spanish. We have therefore provided the following information on the Mexican income tax rules very roughly translated into English:

If you are from those taxpayers who this month must submit its annual statement to avoid problems with the Mexican IRS, lose fear, as there are tools to help in the process, and may even apply their personal allowances and, where appropriate, get a refund.
Aristotle Nunez Sanchez, head of the Tax Administration Service (SAT), explained that until April 30 taxpayers, individuals enrolled in the register of causes are required to submit their annual return; otherwise, will be entitled to a fine.
The obligors to fulfill this responsibility are all natural, except Incorporation Fiscal Regime (RIF) people; those receiving income from fees, leasing, business, sale and purchase of goods, dividends, premiums and other revenues, and employees who earned revenues of 400,000 pesos, as well as additional income earners salary.
He recalled his right as a taxpayer to make personal deductions. He explained that from this year individuals can deduct their personal expenses up to 10% of their income or four high minimum wages per year (up to 98.243 pesos), whichever is less.

Applications that facilitate the process

To facilitate compliance, Aristotle Núñez said you can use the applications available on the website of the SAT.
In case of an individual who receives income from wages can only access the application within the minisite Employees Annual Statement. To enter only requires RFC, password and personal deductions.
While if it is registered as an individual whose income comes from leasing, interest, business, and does not belong to the tax regime Incorporation must be submitted through the DeclaraSAT application, available on the same site. In this case, you should have on hand the RFC, password, personal deductions and monthly statements to date (in case you have any pending, you must file before making your annual statement).
The head of the SAT noted that applications are preloaded data identification, income and deductions in the case of wages, plus interest income to the information provided by financial institutions.

No income individuals also have obligations

Finally, he said, if you are discharged in the RFC for any of the above items, but not received income during the year, you need to report this situation, presenting the annual return to zero. This it can do online or call Infosat (01 800 46 36 721).

The SAT advised

To avoid complications with his fiscal SAT recommended:
  • Fill each and every one of the fields of the statement.
  • Declare all income which have been collected in the year.
  • In the case of being obliged to have the current interim payments in 2014.
  • Check the validity of electronic signatures.
  • Submit your annual statement as soon as possible and no later than April 30 to avoid penalties.

Expenses you can deduct

In order to obtain a credit balance you may file tax receipts of the following expenditures:
  • Payments for educational services (school) with the following buffers.Preschool 14,200 pesos; Primary 12,900 pesos; secondary 19,900 pesos; professional technician 17,100 pesos, and baccalaureate or equivalent, 24,500 pesos.
  • Medical and dental fees. Drugs are included in hospital bills, analysis and clinical studies. No vouchers are from pharmacies.
  • Insurance premiums medical expenses.
  • Funeral expenses. Only the amount not exceeding the minimum wage of the geographic area of ​​the taxpayer, raised annually.
  • Donations granted to authorized institutions. The amount of donations deducted must not exceed 7% of the taxable income of the previous year to which it is declared.
  • Actual interest paid on the mortgage of house room whenever the credit granted does not exceed 1 million Udis 500,000.
  • Deposits in special personal accounts for savings, premiums for insurance contracts that are based pension plans and acquisition of shares of investment companies.
  • Additional contributions for retirement. The amount of this deduction shall not exceed 10% of its taxable income for the year, without those contributions exceed the equivalent of five minimum wages of its high geographic area annually.
  • School transport (mandatory) of children or grandchildren.
  • Payments for educational services with the following buffers: Preschool 14,200 pesos; Primary 12,900 pesos; secondary 19,900 pesos; professional technician 17,100 pesos, and high school or equivalent, 24,500 pesos.

Helpful Advice on Your Mexican Income Taxes

If you live in Mexico full time you are suppose to be filing a Mexican return as well as your US tax return each year. Here is some helpful advice on your Mexican taxes.

When you need help with your US taxes while living and working in Mexico go to  We have been doing taxes for Gringos in Mexico for over 25 years. 

Friday, February 20, 2015


With the meteoric rise of real estate prices here in Cabo, there are many people realizing gains on their homes when they sell them. When you purchase and sell real estate in Mexico for a profit, you are responsible for certain capital gains tax. This information was prepared to keep you informed about the tax system in Mexico. We also recommend you to consult a notary and/or an experienced tax advisor.

Capital gains tax is based on the profit you make when you sell your property in Mexico, when property changes hands, the notary withholds a certain percentage, based on the difference between the recorded value on the title (fideicomiso) and the sales price with a variety of deductions.

New Rules for Capital Gains in Mexico Starting 2007
Mexico, as well as the United States, provides its residents a capital gains tax incentive for their primary home. The new tax incentive in Mexico states that if you sell your “primary residence” after five years, you pay no capital gains. This law is in place for residents (Mexicans or foreigners), and in order to provide proof that your house is primary residence you need can provide one of the following documents:

1) Phone Bill
2) Electricity Bill
3) Local Mexican Bank Statements

The documentation above needs to be addressed to the property owner, his/her spouse, or his/her ascendants or descendants using the address of the property being sold. Another distinction made on your primary residence is that the land it resides on shall include no more than 3 times the total covered area of construction for the house. This is to prevent the qualification of the capital gains exemption when a land owner sells several acres of land with just a small house on it.

Article 109 XV of the income tax law called “Ley del Impuesto sobre la Renta” was recently modified and now exempts from the tax any primary residence sold for an amount no exceeding one million five hundred thousand units of investment (UDIS) which is approximately $500,000 usd as of today. UDIS is a unit of investment calculated in respect to the rate of inflation. The value of a unit is established by the Banco de Mexico, which is published on the internet at

If a homeowner sells his house before he has resided in it for 5 years, he will be responsible to paying the capital gains tax for an amount that exceeds the one million five hundred thousand UDIS.

Please keep in mind too that the capital gains exemption for your primary residence is applicable only once per year.

Hopefully, this information has proven helpful to you and gives you a better idea of what you will have to pay in terms of capital gains taxes once you do sell your home here in Cabo.
Happy House Hunting,
Los Cabos Agent
Nick Fong

US TAX NOTE; Remember you can also claim on your US tax return a primary residence gain exemption if you qualify of $250,000 if single or $500,000 if married, if you live in the house full time for 2 full years out of the five years prior to sale.  If it is a vacation property it is not eligible for this US tax exemption, but you can take a foreign tax credit for the taxes you pay in Mexico on the gain which should in most situations offset the IRS tax on any capital gains on sale.  Most states however do not allow a foreign tax credit on state returns and therefore you may owe capital gains in your state of residency.

Write us for more information:  

Tuesday, February 10, 2015

Highest and Lowest Tax Countries in the World

Expats C should all move to Bulgaria. Though if you are US expat it may make no difference. Definitely do not retire to Spain, France or Portugal. As a US Citizen you will end up paying a lot more taxes.

From the Wall Street Journal.

Saturday, January 31, 2015

Expats Living and/or Working in Mexico are Exempt from Health Care Law for 2014

Many  US taxpayers are exempt from Obama Care  (ACA) for 2014.   One exemption is expats who live and work abroad. See below:

Citizens living abroad and certain noncitizens - You are:
  • A U.S. citizen or resident who spent at least 330 full days outside of the U.S. during a 12-month period;
  • A U.S. citizen who was a bona fide resident of a foreign country or U.S. territory;
  • A resident alien who was a citizen of a foreign country with which the U.S. has an income tax treaty with a nondiscrimination clause, and you were a bona fide resident of a foreign country for the tax year; or
  • Not a U.S. citizen, not a U.S. national, and not an alien lawfully present in the U.S.

To read about the other exemptions  from the US ACA health care law, and tax read the following link

We are ready to help you with these complex rules.   We offer a mini consultation to give you answers to all of your expat and international tax questions. We also offer a service to review self prepared expat returns or foreign tax forms which is much less costly than having us prepare the returns.  Email.