Taxation for Expats in Mexico

Mexico has become one of the more aggressive countries in Latin American when it comes to taxing its residents. Mexico taxes residents on their worldwide income. If you’re living and working in Mexico, the government wants their cut. Those paying taxes in their country of origin are in noncompliance with our tax code and income tax laws.

In most cases, you’re a resident for tax purposes if Mexico is your primary home (your home base) and you spend more than 183 days in the country.

If you are viewed as a resident (when you spend less than 183 days a year in Mexico) and if SAT (Our IRS) believes Mexico is your “center of vital interests”, they will classify you as a resident for tax purposes.

Likewise, you’ll pay Mexican tax on any capital gains or passive income earned abroad. A foreign tax credit is available to eliminate double taxation.

If you’re not a resident of Mexico, you’ll only pay tax on your Mexican sourced income. For example, you’re living in the U.S. and work 30 days in Mexico for a Mexican corporation. This income is Mexican source and taxable in Mexico.

Also, all personal services rendered in Mexico generate Mexican sourced income and is thus taxable in the country.