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.

[Karen3152]

@Victor3788 You are supposed to pay taxes in Mexico.  When I do my taxes in the US, once I check the box that it is a foreign investment, it does not raise or lower my tax burden, but that is my experience.  I found a Mexican law that says you are supposed to be able to get an RFC without residency, but I have not found anyone in Mexico that provides that service.  

[Mehdi307]

Hi Karen,

if it is not too much of bother, could you please share your accountant information?

Thank you

[Karen3152]

He is in the San Jose del Cabo area.  If you are within a 1 hour drive of that area, he can probably help you.  Please send PM if you still want his info.

[Sonya219]

@Karen3152 ,

Thank you for this! I uploaded my RFC to airbnb and listed my Mexican property on airbnb connected to my Mexican bank account for payouts. I am a US Citizen but a non-US resident (I spend more than 335 days out of the country) so I am confused as to which tax form I fill out on airbnb: W9,  Form W-8ECI or W8-BEN. 3 different airbnb reps are giving me different info.  I haven't filled out the tax form except for my RFC info and I am getting the mexican 3% held, VAT AND 24% US tax held. Super confused as what to do. Any help is really appreciated.

[Samantha1392]

@Karen3152 i am in the same situation in Mexican American citizen I have a Mexico Airbnb and I get paid out through my Mexican bank account i do not have my RFC connected now my question is i understand if I connect it that it will report my taxes I understand that if I do not connect my number that my taxes are being sent to the IRS to be whatever.What I don't understand or maybe need help realizing Is it better to have the payout to my Mexican accountor will it be better to have my payout to an American accountWhich is more profit being that exchange rates and everything I also have Capital One which I do know are the best exchange rates. So if I claim myMexico Airbnb in AmericaAm I profiting more getting it to my American bank account than to my Mexican bank account and then exchanging.

[Karen3152]

I file taxes in both US and Mexico.  Supposedly, you will be charged 20% withholding by AirBnb if you don’t upload your RFC and you can’t get that back.  The lower the peso is against the dollar, the fewer pesos you will get in your Mexican bank account,  but if you need to spend money in Mexico, then you will be affected by the exchange rate.  AirBnb’s transfer rate is slightly better than the published rate.

[Nikki573]

Hi @Karen3152  ! Your information was extremely helpful to me and partner. We are US Citizens as well on our journey to start the airbnb host service soon. Figuring out the steps to begin has been a challenge in itself. We are working now to avoid as many of the fees as possible. If you available for a zoom call or email please send me a private message. We are open to compensating for your time and information as we know it is very valuable. Thanks Karen hope to hear from you soon 

[Karen3152]

Hello @Nikki573 .  I am not a professional advisor who has researched all the possibilities, so I am not comfortable taking money for advice.  I can only share my personal experiences and if you have a question about something where I have a personal experience to share, I am happy to share it. 

[Nikki573]

Okay Great @Karen3152 ! 

As a start up airbnb host, with a U.S. Citizenship, is there a way for me to avoid the MX or US tax withheld ?

Once I obtain a RFC, will the tax go down from 20% to 4% ?

I’m only looking to rent the property to post on airbnb, not own. What are the qualifications to get the rfc if I’m just renting ?

[Karen3152]

@Nikki573 This is a strange situation if I understand you correctly.  You plan to rent a property and then turn around and rent it out on AirBnb?  In order to get an RFC, you must have a Mexican address for your residence.  I assume you are not retired, in that case, you would have to apply for temporary residency using the Mexican address that you rent as your Mexican residence.  They are going to want a CFE bill. I am nit positive, but I don’t think it has to be in your name.  You should be aware that you will have to come to Mexico periodically to renew your temporary residency.

I did not have any money withheld for US taxes by AirBnb once I registered my Mexican RFC with AirBnb.  Yes, Mexican withholding is 4%. 

if you plan to do this, there is no way you are going to be able to do this without a Mexican accountant who can advise you better than I.

[Karen3152]

@Nikki573 I have to say that I am very concerned about the idea of renting a property long term and then turning around and renting it on Airbnb. Mexican rental snd tax laws  are very different than the US. I know this is a common practice in the US, but you could easily run afoul of Mexican laws here. My experience with Mexico, I would not do this unless someone else has done it successfully and legally and can guide you. Mexico is NOT a walk in the park. 

[Heidi947]

Hi @Karen3152  - This whole string has been super informative as I just purchased a property in Cabo and listed it on AirBnb. I also live in the Sacramento area and was wondering if you have any tips for scheduling an appointment with the Mexican Consulate in Sacramento? They are not answering the phone and the link on the website to schedule an appointment does not work. Thank you in advance for any advice and for sharing your experience!

[Ken3763]

@Karen3152 ,

Did you show original copy of notarized deed for your property in Mexico during your visa process? I have digital copy, but original copy will take a few months.

The resident visa real estate specifies original, but just wondering if I can get by and not wait. Otherwise I'd rather go through with economic solvency visa.

Thanks

[Karen3152]

@Ken3763 I used a copy. Did not have a problem but every province is different. 

[Ken3763]

Ok great @Karen3152. I have another question. Where does it say you need to file taxes monthly rather than annually? Thanks