Tax on property income in Mexico
Taxation Researcher | September 20, 2020
Effective Tax Rate on Rental Income
|Click here to see a worked example|
Global Property Guide research
Nonresident individuals are liable to pay tax on their Mexican-sourced income. Married couples are taxed separately.
INCOME TAX (Impuesto Sobre la Renta, ISR)
Income earned by nonresidents is taxed at progressive rates.
EMPLOYMENT INCOME TAX 2017-2020 FOR NON-RESIDENTS
|TAXABLE INCOME, MXP (US$)||TAX RATE|
|Up to 125,900 (US$6,626)||0%|
|125,900 – 1 million (US$52,632)||15%|
|Over 1 million (US$52,632)||30%|
|Source: Global Property Guide|
Gross rental income from the leasing of real estate, property and time-sharing services by a nonresident individual is subject to a 25% withholding tax. No deductions are allowed.
Generally, capital gains realized by nonresidents 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
Nonresidents who have appointed representatives residing in Mexico may be taxed on their net capital gains at 30%. 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 Tax (impuesto predial)
Property tax is levied on the cadastral value or 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.