|
MEXICO MAGICO
Paying taxes when a property is rented |
By Prof. German Estrada - March 2007 – Photos by Jesús de Avila. |
 This article below was written in December of 2003, and it is related to paying taxes when the properties are rented. As happens with anything that has to do with “paying anything” in this country…especially when it comes to TAXES….nobody paid any attention to it. Well, it took the Federal Government 3 years to “supposedly” start applying this time the law” (at least that’s what they are saying). Of course, when they “do” come….they “may” come…, the problem is that when they “really” come…..things can be ugly ……and, well, we’ll see what happens this year of 2007….
Regardless, we though it would be good to let you know –again-- about it.
TAXES: that ugly word! (1st part)
A few months ago the Secretaría de Hacienda (IRS) sent a letter to all the Administrators of Condominiums in Vallarta, asking them to deliver a circular (in English & Spanish), to ALL the owners of the units in their building, Mexicans and foreigners alike. This circular contained the following information:
Dear Tax Payer:
If you are a physical person actually renting out or leasing your housing facility such as an Studio, Condo, Town House, Residential Home or even Commercial space, whether for specific term or on a full-time basis, you have to register at Hacienda before the Department of the Federal Tax Payer Registrar (SAT) – part of the Secretaría de Hacienda y Crédito Público – as you are subject to certain Tax obligations such as the ones stated below:
• You have to keep an Account
• Issue Receipts
• File provisional Tax Declarations
• File Annual Declarations
• (among others)
If you are a foreigner residing abroad and renting out or leasing real estate property of any kind – whether directly or through a third party – you are subject to other obligations as well.
For further information contact us as soon as possible:
Office in Puerto Vallarta: 224-9505 or 225-3848
Toll free number: 01 (800) 904-5000 or visit our web page at: http://www.shcp.gob.mx
I would like to add that although this “circular” was sent and received in Puerto Vallarta, bear in mind that this applies to the Restricted Zone (1) as well as to the rest of the Mexican Republic.
1.Article 27 of Mexico’s Constitution forbids foreign ownership of coastal real estate and
provides restrictions for all foreign ownership elsewhere in Mexico….
While only citizens and nationals of Mexico may freely acquire real estate in Mexico, foreigners may be granted the right to own real estate property only under very specific conditions. The current conditions are contained in the Foreign Investment Law (2) of the United Mexican States, published in the Official Gazette of the Federation dated October 27, 1993.
The Mexican Constitution prohibits direct ownership by foreigners of property within fifty kilometers (approximately 31 and one-quarter miles) of the seacoast and one hundred kilometers (about sixty-two and one-half miles) of Mexico’s international boundaries – the prime areas for retirement and/or vacation homes and apartments. As noted above, there are laws to allow or encourage foreign investment throughout Mexico.
 Foreigners can have the use of property placed in trust with a Mexican financial institution. Under such trust agreement, a bank is the trustee, or actual titleholder, of the property. The foreign buyer is the beneficiary of the trust having all rights to use, enjoy, and sell the property, but is not considered the legal owner of record and this exercise of his trust rights depend on the specific wording of the trust agreement from which he benefits. All trust must have the approval of the Secretary of Foreign Relations before final documentation can be delivered to the beneficiary.
Note: the above text has been taken from the US government advice to its citizens which, being absolutely correct, we’re just transcribing.
In several newspapers around the country, long articles dealing with the Taxation on Rental Properties have been written, as it seems that the Mexican Government is trying to start cracking down on tax evaders (Mexicans and foreigners).
Once again, all we’re trying to do is to make everybody aware of the possible dangers that may bring the lack of attention to these laws. The new Federal Government is short of funds to do its job……, and “new”, or not so new taxes are needed desperately, so…
If the “owners” of property who rent it, go ahead doing it without registering with the Mexican IRS (SAT), it will not help them to cry later that they “didn’t know about it”.
They want to “risk it”, and take their chances….well, all we can do is wish them good luck!
Prof. German Estrada
E-mail: estradanav@yahoo.com
Note: This article is re-printed every year –since 2004--for the benefit of the new readers of the PVMirror.
Prof. Germán Estrada is the author of the best selling book, México Mágico: Everything You Wanted To Know About... But Nobody Told You..." available in Puerto Vallarta at The Book Shope, Libreria Guadalajara, as directly from his website.
Archives by date |
Current
Weather Report
