Vacation Rentals In Mexico – Tax Obligations You Must Know

Posted by Run Away Realty on January 10th, 2020

Owning real estate in Mexico, and particularly in the Riviera Maya, can have several advantages for you & your family. Having a vacation home in one of Mexico’s most renowned destinations & earning additional income is considered having the best of both worlds. All through the years, several foreign investors have created a nice rental income for themselves. But like anywhere else in the globe, you have to sacrifice a part of your profits by way of taxes. Learning the local tax laws should be researched & studied before and/or during the buying process.

Listed below are some simple tax tips that might assist when investing in Mexico’s growing real estate market:

• If you work and/or gain income from an investment in Mexico (even if you aren’t a citizen), you’ll most probably have to pay income taxes. A good place to begin is by contacting the Servicio de Administración Tributaria (SAT or Hacienda).
• All income earned in Mexico carries a certain taxation. Regardless of how it’s distributed or gifted, paid in pesos or USD, or any other monetary valued payout. It has to be reported as income.
• When you own property in Mexico & are a partial or full-time resident, you have to register with Mexico’s Registro Federal de Contribuyente (RFC). This is identical to your Tax ID number.
• All rental earning is subject to Impuesto Sobre la Renta (ISR). Your residential status is independent from it. You must pay taxes on your rental earning. The ISR tax rate is based on 25 percent of your gross income earned.
• If the rental property is furnished, on top of the ISR tax, there’s an Impuesto al Valor Agregado (IVA), or valued added tax (VAT). The IVA is collected from the renter & paid to the Mexican govt by the landlord. This is an extra 16 percent tax charged directly to the tenants.

For more information on Mexico luxury real estate feel free to contact Run Away Realty. Working with a collaborative team approach, we help others in discovering how special our community is. If you’re thinking of buying or selling in Mexico, we are always here to assist you. For a hassle free real estate experience in Mexico you can always rely on us. Sign up with us now to receive news and property listing alerts.