Do I need to pay income taxes on my Mexico rental property if I only rent it a few times a year?



Mexican newspapers are full of headlines about the growing problem of foreigners who are renting their homes or condominiums and failing to pay Mexican taxes.  Not only is this a violation of the terms of most bank trusts (fideicomisos), but also it is a violation of Mexican tax law and reprisals are severe.


FOREIGNERS ARE OBLIGATED TO PAY TAXES ON INCOME GENERATED IN MEXICO.  Mexico’s tax law is patterned after those of the United States and Canada (world rental system) which states in the First Article:


Article One: Physical persons (individuals) and legal persons (companies) are obligated to pay an income tax in the following cases:


I.Residents of Mexico, must report and pay on all income no matter where the source is located;

II.Those with residence in a foreign country with a permanent establishment in Mexico must report and pay on all income generated from the permanent establishment in Mexico.

III.Those with residence in a foreign country, must report and pay on the income produced by property located in the national territory, when there is no permanent establishment in the country or, even if there is, but not covered by the situations outlined in I and II above..


Do I have to pay taxes in Mexico and at home US/Canada?

Income from rental properties is taxed in Mexico.  The NAFTA treaty stipulates against double payment of taxes but you are required to declare international income.  It will be necessary for you to consult with your US accountant to determine exactly how the state reporting is handled.



The Settlement Company®, has solved the dilemma of non-resident foreigners paying taxes on Mexican rental income. If you own a property in Mexico and rent it often or only occasionally, ENJOY your rental income and sleep easily knowing you have complied with tax laws.


The Settlement Company® with many years of experience in the transfer of titles and resolution of problems related to title, is now able to assist you.  We receive your funds in an escrow account, deposit the balance of rental income, make sure you comply with your fiscal obligations in Mexico and provide you with receipts of payment of taxes in Mexico and the documents you require in your country of residence to avoid double taxation.


Under new government regulations, the taxpayer has two options:   One WITH a Federal Taxpayer Identification number, and the other with WITHOUT a Taxpayer Identification number!  This is an ideal program for non-residents that pays the required taxes and permits deductions in your home country. Contact us for more information about this program.

Linda Neil