Mexico: Taxes and Costs
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Mexico has high taxes on rental income
INDIVIDUAL TAXATION
Non-resident individuals are liable to pay tax on their Mexican-sourced income. Married couples are taxed separately.
INCOME TAX
Non-residents are generally liable to pay 25% withholding tax on their Mexican-sourced income.
RENTAL INCOME
25% Withholding Tax
Gross rental income from the leasing of real estate, property and time-sharing services by a non-resident individual is subject to a 25% withholding tax. No deductions are allowed.
Electing Business Income Option
Non-resident individuals earning income from leasing property can consider their rental income as business income and choose to file an income tax return. Through this option, the taxpayer will be taxed on his net income at progressive rates.
INCOME TAX RATES 2008 |
|
| TAXABLE INCOME, MXP (US$) | TAX RATE |
| Up to 5,953 (US$419) | 1.92% |
| 5,953 – 50,525 (US$3,554) | 6.42% on band over US$419 |
| 50,525 – 88,793 (US$6,246) | 10.88% on band over US$3,554 |
| 88,793 – 103,218 (US$7,261) | 16.00% on band over US$6,246 |
| 103,218 – 123,580 (US$8,694) | 17.92% on band over US$7,261 |
| 123,580 – 249,244 (US$17,534) | 19.94% on band over US$8,694 |
| 249,244 – 392,842 (US$27,636) | 21.95% on band over US$17,534 |
| Over 392,842 (US$27,636) | 28% on all income over US$27,636 |
| Source: Global Property Guide | |
Income-generating expenses, depreciation allowance and property taxes are deductible when computing for the taxable income. Instead of itemized deduction, individuals may elect a standard 35% deduction of the gross rent to account for income-generating expenses.
CAPITAL GAINS
25% Withholding Tax
Generally, capital gains realized by non-residents from transferring real property in Mexico are subject to 25% withholding tax on the gross amount or selling price of the property.
Non-residents with Appointed Local Representatives
Non-residents who have appointed representatives residing in Mexico may be taxed on their net capital gains at 28%. The tax base is the gross selling price or market value of the property, whichever is higher, less adjusted acquisition costs (the adjusted cost may not be less than 10% of the transfer value), investment costs and improvement costs, and transaction costs (taxes, valuation, notary fees, commission and brokerage fees).
PROPERTY TAXES
Property Tax (impuesto predial)
Property tax is levied on the cadastral value (assessed value) of the real estate. The tax rate ranges from 0.05% to 1.2%, depending on the property location as each state has a different tax rate. It is payable to the state government annually.
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