Rent of Real Estate in Mexico: Tax Opportunities for US Residents

By José Carreras Benitez, INTEGROUP S.C.

Mexico has been considered a very attractive country for foreign investment. Residents abroad have acquired real estate in Mexico, mainly for relaxing, retirement purposes, and weather conditions. It is very common for US residents to stay in Mexico from October to March of the following year. Sometimes, US residents decide to rent such real estate, which means they are triggering taxable revenues for Mexican purposes.

According to Mexican Income Tax Law, the tax is determined by applying a rate of 25% to the aggregate revenue obtained, with no deduction, and the amount shall be withheld by the person making the payment. If the payer is a foreign resident, the tax shall be paid through a return filed with the tax authorities within fifteen days following receipt of the revenue.

However, the Tax Treaty to avoid double taxation between Mexico and the US allows income tax to be determined on a net basis as if such income is attributable to a permanent establishment in Mexico. This means that a US resident may elect to pay income tax on rental income as a Mexican, which may result in a lower rate than the 25%. Some formal requirements must be complied with before the Mexican Tax Authorities in order to make this tax election.

In the case of tax residents outside the US, other legal or tax options may also be available.

José Carreras Benitez

José Carreras Benitez

INTEGROUP, Tax, Legal & Audit, Guadalajara, Jalisco, Mexico
T: +52 33 36 15 78 15
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INTEGROUP is a full service firm offering specialised services in tax, legal, audit and internal control. It has a group of experts with extensive experience who offer a personalised, ethical and highly professional service in order to provide effective and rapid responses to client requirements.

José Carreras Benitez is the Tax Partner in charge of dealing with international businesses. Since 2000, he has gained experience in providing VAT consultancy and win-win ideas. José is fluent in both Spanish and English.

Published: Winter 2017 l Photo:  damedias -

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