Facts On Vacation Property Rentals

Facts On Vacation Property Rentals

  • Live Real Estate
  • 03/11/19

Regardless if the income is received in a foreign bank account, or if you are reporting your income in another Country, you are still obliged to report income generated in Mexico to Mexican authorities. On a positive note, we do have Double Taxation treaties in place with 32 countries including the United States and Canada. Simply put, the taxes you pay to Mexico can be deducted on your domestic US tax return.

Tax Obligations for rental properties in Mexico.

  • Income Tax known as ISR (Impuesto sobre la renta) on all income earned in Mexico (usually 25%). No matter how it is paid in pesos or foreign currency, it needs to be reported as income.
  • All landlords are required to emit fiscal invoices known as CFDI or Facturas for rental income received.
  • When a property is furnished, it must include an additional 16% of IVA (Value Added Tax). This tax is usually charged to the renter.
  • In our state of Guerrero, we also need to comply with an occupancy/lodging tax of 3% ISH known as Impuesto sobre Hospedaje. Usually charged to the renter.

Although in the past, it was possible to avoid taxes in Mexico, in the present day this is no longer possible. If you decide to ignore this obligation, SAT will assess the maximum penalty on all taxes owed. In addition, SAT may deport the individual who is responsible for the property and yes, the Mexican government can take possession and sell the property to satisfy the amount owed.

So to help all owners and to make this simple for you, check out our Rental services thru LIVE by ZAR. We act as the legal Mexican company renting your property, helping you avoid these complicated matters and having to deal with Mexican accountants and/or SAT. LIVE acts as the company responsible for reporting all income from rentals and working with their owners/clients to get the maximum tax benefit through legal deductions of your property expenses.

Contact us to know more!

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