Mexico has high taxes on rental income

Taxation Researcher | February 07, 2019

INDIVIDUAL TAXATION

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 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

RENTAL INCOME
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.

CAPITAL GAINS
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 TAXES

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.

 

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