US Citizen with Property in Mexico, Paying Mexican Taxes

[Karen3152]

It took months, but as a U.S. Citizen, I finally got a Mexican Tax ID (RFC) and registered with AirBnb.  Here is what you must do in order to have AirBnb withhold the ISR (income) and IVA (sales tax) and forward to the Mexican government:

1.  You must obtain temporary or permanent residency.  You should have a passport that will not expire during the time it takes to complete the entire process.  It is extremely helpful to find a facilitator in the area where you own Mexican property. to help you through the entire process.  It does not have to be a lawyer or accountant.  This begins with a visit to the Mexican Consulate nearest you in the U.S.  Be aware that in your interview, they will tell you that the purpose of a residency card is that you intend to move to Mexico.  However, they do not require you to sell your home in the U.S. or prevent you from visiting or staying at your home in the U.S. Visit: https://consulmex.sre.gob.mx/sacramento/index.php/visas for more information.  Each consulate office requires different documentation, some require more, some less.  Be sure to check with the particular office you are going to.  You MUST select the right kind of appointment (VISA), if you select the wrong kind of appointment, you will be wasting your time. NOTE: for U.S. Citizens, your nationality is: Estadounidense

    a.  Owning a property in Mexico helps to assure your approval.   Bring the title with you to the Consulate.

    b. If you already have a property in Mexico, be sure to have the electrical bill placed in your name.  You will need this document through every stage of the process.  You will need some kind of proof of your Mexican address.  

2.  Once the Consulate approves you for temporary or permanent residency, you have 180 days to travel to Mexico.  Once in Mexico, you have 30 days to go to the Immigration (INM) office in the Mexican province (county) of your Mexican address.  Some offices require appointments, some don't.  This is where your facilitator will be of great help.  Have them get you that appointment as soon as you receive your Visa from the Consulate.  Some INM offices are faster than others, you may have to come back a second time to get your residency card.  A second visit could take anywhere from three weeks to two months.  I got my residency card the same day, but I waited 4.5 hours.  You may need to bring chairs, water, lunch, etc.  Your facilitator will know how the office is currently operating.  If you can travel during low tourist times, your chances of minimal wait times are better.  The residency card is your CURP - which identifies you as a resident or citizen, but does NOT serve as a Mexican Tax ID - that is an RFC.

3.  As soon as you have your residency card, your facilitator should make an appointment at the nearest SAT office located in the province of your Mexican address.  It took me more than one month to get an appointment after I got my residency card.  My facilitator said he got me on a waiting list even before I got my residency card.  Some SAT offices may accept walk-ins.  This is where your facilitator can be of service once again as not all SAT offices operate the same.  My experience was, I got my RFC and Fiel (electronic signature) on the same day in 1.5 hours.  

4.  Upload your RFC to AirBnb.  Click on your picture Avatar > Accounts > Payments & Payouts > Taxes.  You should see a button "Add International Taxpayer."  I could not see this option and had to be relentless with AirBnb support for 4 days to get them to finally add that button.  Click on your Avatar > Help > Contact Us.  

5.  Airbnb says the 16% VAT is automatically charged to the guest and should be a part of your withholding certificate.  You should not need to add additional fees for this.

6.  Taxes need to be filed every month on the 17th.  This is why you need an accountant.  Often it is an accountant who serves as the facilitator to help with the residency process.  

7.  Once you have uploaded your RFC to AirBnb, you will receive an email from AirBnb on how to login to Facturify.com to download your withholding certificates.  

8.  You should be able to continue to send payouts to the US.  I pay all my Mexican bills either through Xoom.com (CFE) or XE.com (Property Manager), etc.  I use my CapitalOne credit card (no fees, great rates) and my Credit Union ATM (low fees, great rates).  My accountant told me it is not required that I send payments to a Mexican bank, so I have not opened a Mexican bank account. But plan to stay a little longer in Mexico if that is something you and your accountant feel you need.

9.  Understand what a factura is.  You can't write off anything on your Mexican taxes without a factura.  http://www.bajainsider.com/article/what-factura-official-tax-deductable-document.

That's it.  I started this journey in late January 2022 and completed it all the way through on May 7, 2022.  It was not easy, but I finally made it.

[Sybe]

@Karen3152 this is amazingly detailed, thank you so much for writing this post! 

[Karen3152]

A few additions to this post since I can no longer edit my original post:

1.  Permanent resident v. temporary resident. 

     a. Temporary resident - you can initially qualify to earn money in Mexico.  You have to renew each year and the rules are demanding: https://www.mexperience.com/expired-mexico-resident-permit/#:~:text=To%20apply%20for%20renewal%20of,....

    b. Permanent residency.  If you are retired and meet the requirements, you can go straight to permanent residency without the hassle of renewing every year.  You will be told that you cannot earn money in Mexico and your immigration status will be "non-lucrative."  I was able to go straight for permanent residency.  After I got my residency card, my facilitator got me an appointment at SAT, and he submitted the papers for a lucrative RFC on digital platforms (like AirBnb and VRBO).  Then I went back to immigration to submit the forms to inform them that I now have a lucrative RFC.  I did this all in one trip to Mexico but it took me just over one month to get it all done.

2. Rules when waiting for residency card.  When you have submitted your papers to INM and they do not issue your residency card the same day, you cannot leave the country without permission until the card is issued.

Good luck to all in this situation.

[Michelle3324]

Hi @Karen3152 ,

Thank you so much for all your great advice!!! I have been searching and searching!!!

I purchased a property in Todos Santos and have been struggling to find an accountant or anyone who can guide me on the process of setting up the vacation rental so I can pay taxes.

I looked online which says that a Temp Resident is not able to earn money in Mexico....is there something else I need to be able to collect rent and pay taxes?  

Any additional advice is greatly appreciated!!

[Karen3152]

@Michelle3324 You can earn money as a temporary resident on digital platforms which includes AirBnb and VRBO.  If you have an RFC, look at it.  Under Regímenes - the entry should be: "Régimen de las Actividades Empresariales con ingresos a través de Plataformas Tecnológicas."  If it doesn't say that, then you need to go to SAT to get it changed.

I will send you a private message with the contact information of my accountant in San Jose del Cabo who knows how to file your taxes and can help you get your RFC Regímenes changed if needed.

[Mehdi307]

Hi Karen,

what if the RFC , under Regimenes, it is saying :  "Regimend de sueldos y salarios e ingresos asimilados a salarios". would it be ok to use the RFC for the Airbnb?

Thank you

[Karen3152]

@Mehdi307 The RFC you have allows you to earn a salary.  If you are not earning a salary in Mexico, or do not intend to earn a salary in Mexico, you need to change your status with SAT.  Please note that I am not a Mexican accountant. I am just making a reasonable assumption. 

[Karen3152]

I checked my listing on AirBnb to confirm that they are charging the 16% VAT to the guest. Confirmed.  It is included in the guest fees and if you click on the link next to the guest fees, you will see the explanation of fees includes the VAT. 

[Tom3416]

Hi Karen thanks for all your info , i have checked my guest fees and i dont see anything about Vat i do see they get charged occupancy taxes is that the same? also in my payout i get a host remitted tax paid to my payout then removed as a vat on another line , why do they have to make this so difficult .ive included pics of both things i see ,is this what you saw before you got your rfc  

[Karen3152]

I see that the “occupancy” tax in your example is equal to 20% of the booking rate.  The highest occupancy tax in Mexico is 4%, I believe depending on where your property is located.  It would appear that they have lumped the VAT into occupancy tax here. Before I got my RFC, they only charged for occupancy tax.  When I figured out they weren’t withholding anything, either for VAT or income tax, I shut down my listing immediately and started the RFC process. Then once I got my RFC, I had a terrible time convincing them that the property was in Mexico because it is in a rural area with no official address. When I originally setup the property on AirBnb, the best I could do was use the map feature and place a pin on it. They kept trying to tell me the property was in California. I went to the location information of the property and tried to update the text information of the location but it would not accept anything I tried to enter.  However, when you did a search as a traveler for my property on Cerritos Beach or El Pescadero in Mexico, my property came up. It took four days, constantly harassing AirBnb support to get them to understand the property is in Mexico and I want to pay the taxes that are owed to the Mexican government.  The Mexican government can search for properties in this area, they can request the booking information from AirBnb and the owner will be the one held responsible for the taxes not being paid and they can seize your property for not paying taxes.  The 16% VAT is automatically added to the bill for the guest to pay if your property is correctly registered in Mexico.  There may be more people who own property in this up-and-coming area who may not know about this problem and need to pay attention to what taxes AirBnb is collecting and paying. Or maybe my situation was unique - I have no idea, but I can tell you for sure I had trouble with entering the location of the property with an address. 

[Jay-and-Andrew0]

UMMM WOW @Karen3152 THANKS!!!!!

what a hassle we have been having with our place in Rosarito

[Karen3152]

I'm afraid to ask because everything is such a challenge here in Mexico.  Good luck!

I think people who don't live in Mexico should have a better understanding of what they are getting themselves into when it comes to owning property in Mexico and properly paying Mexican income and ISA/VAT taxes when you rent your property on digital platforms.  I read several articles that stated that if you are not paying taxes in Mexico, your property can be seized.  One article made it sound like you can register with the Mexican tax authority (SAT) without obtaining residency, but I don't think so.  If someone out there has managed to do it, I would like to hear their story.

[SolMar3]

Thank you so much for such a detailed information. What about us who have a timeshare? Do you have any information are we able to get the RFC number? 

[Karen3152]

Sorry.  No idea.

[La-Dell1]

Do you have any tips for using Facturify?  That is a service that sort of automatically seemed to be available for me, but the interface is pretty bad, sometimes I see my VAT and other tax facturas, sometimes I don't.  I don't understand the menuing or what the various line items mean.  If anyone has figured it out I would love some insight.  Thank you.