Linda Neil is one of our Top Brokers who has just written another informative piece regarding Mexico Real Estate issues such as taxes as seen below in her article called “Tax Obligations for foreigners in Mexico Death and Taxes…both are inevitable”. Linda has been working in the La Paz real estate industry for over 30 years and has tremendous experience in the issues that most effect new non-Mexican property buyers.
Whether a property owner or just the occasional visitor to the La Paz real estate region on the beautiful beaches of Mexico, everyone pays taxes, natives and foreigners. Some of the taxes are hidden and others are not. The purpose of this article is to touch on some of the important taxes levied and paid in Mexico.
WHO COLLECTS TAXES: The SAT (Servicio de Administracion Tributaria), also known as Hacienda, is the federal tax collector. It collects all federal taxes such as the ISR (Income or Capital Gains) tax, the IVA (Added Value) tax, the IDE (Tax on Cash Deposits) and the IEPS (Special Tax on Production and Services). Each state government has its own taxes such as the 2 to 3 percent tax on lodgings and tourism. The municipal governments assess and levy taxes on real and personal properties.
IVA TAX: This is the Value Added Tax which is charged on goods and services. The only exemptions are medicines and food. Often this tax is INCLUDED in the price of food served in a restaurant, legal services, and the items purchased in a department or clothing store. The business owner and tax resident is obligated to file a monthly declaration with Hacienda and pay the tax on earnings. Credited against this tax are IVA taxes paid on goods and services acquired.
There is no IVA tax on the sale of vacant Mexico land or on the sale of residential dwellings. The tax is levied on all commercial construction when it is sold or transferred, at the rate of 16% of the value of construction, regardless of where the property is located.
IVA tax is charged on lodgings, hotel rooms and furnished homes which are rented.
As of January 1, 2010, this tax has been increased from 15% to 16% in the interior of the country and from 10% to 11% in the border zones.
IEPS TAX: This is the Special Tax on Products and Services which is a new tax for 2010. It will cover certain internet and cable TV services, alcohol, cigarettes, and gaming.
PROPERTY TAX; This is a municipal tax with assessments on properties generally being made annually. The tax can be paid in six installments (every two months) but probably should be paid in full within the first two months of the calendar year to obtain a discount. Rates vary from area to area but are often far lower than U.S. or Canadian property taxes.
ISR TAX; Literally the Tax on Rents has been described as both an income tax and a capital gains tax. It is complex and a subject of confusion.
ON INCOME. Any income generated from sources within Mexico, is taxable. From business or salary, the rates are variable depending upon the amount of income received.
This is the end of Part I, and you will be able to see the finishing paragraphs in a separate article by the end of the week.
Linda Neil has over 35 years of hands on experience in all aspects of Mexican real estate. She holds membership in AMPI, NAR, and FIABCI and PROFECO Certificate 00063/96. Current member of the national advisory board of AMPI she is the owner broker of LINDA NEIL PROPERTIES for more information (512)-879-6546 THE www.TOPmexicorealestate.com NETWORK
“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”
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