Property in Mexico, owner not a Mexican resident, no RFC, what happens, how to handle?

[Nikolai31]

Dear community, 

I own and run (together with my sister as a co-host living on site) two houses in Mexico (in Nayarit, if it matters). As of October 1, a new tax regulation is in place. Airbnb withholds taxes and transfers the money to the Mexican tax administration, and transmits information on the respective income to that same institution. So far, so good. However, in order to pay taxes in Mexico, one needs a tax payer's number, called RFC. Airbnb asks hosts to provide that number, together with a citizen’s identification number (CURP). The problem is that without Mexican citizenship or at least permanent residency, there is no way to obtain CURP or RFC. What now? I asked airbnb about this repeatedly, and am provided with contradictory information, none of wich is backed up by accessible and official documents:

airbnb withholds 20% IT (+16% VAT) if not providing a valid RFC regardless of your resident status

/

airbnb does NOT withhold 20% IT if the owner is not a Mexican resident.

Even if the latter is true, airbnb still has to provide income information to the local tax authorities. If they do so, those tax authorities will know that I don’t pay IT (because I can’t, without an RFC)—and then what? Then nothing because foreigners don’t have to pay IT and that’s it? Or will they sue me for not paying taxes?

There are many properties in Mexico owned by foreigners (US citizens mostly, but not only), and I know many of them simply quit airbnb because they don’t know how else to deal with the situation. Certainly no desirable outcome for anybody.

Does anybody have any reliable information on the matter?

Thanks!

[Vivian860]

AirBnB can't give you an answer regarding Mexico laws/tax information; they are a third party. I would go to the town or a similar IRS in Mexico and ask them how to go about this and how to retain proper identification numbers. 

I do shows in Canada and I had to get proper ID for my business before crossing the boarder to sell goods. I called their IRS and they helped me out step by step. Hopefully Mexico has something similar and can help you out - if not - I would call your tax accountant or attorney to help you out. 

Hope this helps, Good Luck!

[Charles1272]

I have gone to the IRS to get assistance obtaining a CURP and RFC. They had no idea of what CURP or RFS were. I also have talked to Airbnb for hours as to how to obtain a CURP and RFC. They refer you to websites that are suppose to guide you through this process. They don't, they show you the process if you are a Mexican citizen or a resident. After hours and hours of trying to resolve this problem, I give up!!!

[Sarah977]

@Charles1272  Of course the IRS or Airbnb can't obtain those things for you. Why would the IRS know anything about the Mexican tax dept or any other country's tax dept?

Would you expect the Mexican tax department to obtain a US social security number for you? Or Airbnb to do that?

You cannot get a Mexican RFC, nor a CURP, as someone who comes to Mexico on a tourist visa. You have to be a citizen or resident. That's why that's all the information you can find. 

[Nikolai31]

Sarah’s assessment appears to be accurate, as I found in the meanwhile. It seems one has to apply for a visa (at the Mexican embassy if you’re presently out of Mexico) that allows for applying for a Residencia Temporal at the Instituto Nacional de Migración (INM), then (or with that?) for a Permiso de Trabajo at the same INM (if you need one, which I think you do if you generate income through your rental), and present yourself to the SAT with the Tarjeta de Residente Temporal  you received from the INM, in order to obtain an RFC from the SAT (and while I’m almost certain that one needs to show up at the INM in person, it may be that once that is done, a power of attorney or a legal proxy (poder) may suffice and you can have the person equipped with that poder go to the SAT for you.)

What will happen then is unclear to me. I will have to make my RFC known to airbnb. Airbnb will then contact the SAT and I suppose declare my earnings to the SAT. Supposedly, airbnb was and is responsible for retaining the tax due, and deliver those retained taxes to the SAT as soon as the RFC is present. However, in my case, airbnb has retained nothing (or so it says on the gross earnings sheet airbnb generates for me (Insights / Earnings / Show transaction history / Gross Earnings)). What will happen once airbnb contacts the SAT with my RFC is unknown to me. I don’t imagine the SAT will simply accept that no tax be payed. Will I then have to pay 36% of all my earnings from October 2020 on out of my own reserve fund? If anyone has any insight here, I’d be most interested to hear of it. 

I write this in case anyone else has that same question, and in order to be corrected if I am wrong in any of these findings (which very well I might be). 

Many thanks to Sarah, Charles, and Vivian so far,

Nikolai

[Sarah977]

@Nikolai31  So have you contacted Airbnb to find out why they aren't adding taxes to your bookings? I've still not opened my home share up to bookings (need my second vax first), so I haven't had to deal with this yet.

Yes, the info re applying for temp. residency is correct, you start the process at a Mexican consulate in your home country, (there are some financial solvency regs to meet), have 6 months after that to report to INM in Mexico, and 30 days to report after you enter Mexico. You can only apply for the working status within Mexico.

A Mexican accountant can deal with most of the SAT stuff- RFC #s and CURPs can be gotten online, but at some point you do have to attend in person- if it's still like it was when I got my tax number years ago, they do an iris scan, believe it or not, for ID purposes.

[Nikolai31]

I have contacted airbnb on about everything related to the new tax law in place since October 2020, and never got any consistent answer from them on anything at all. The company, or at least the support agents, are largely clueless. I am resorting to large accountant firms now.

About attending in person—did you have to be there when first registering at the INM, or at a later point, too? When picking up the Tarjeta de Residente Temporal for instance, or even at the SAT, even if my sister has a poder to represent me? Would be great to know, even if with some uncertainty.

[Sarah977]

@Nikolai31  I became a temporary resident about 18 years ago, and am now a permanent resident, and INM procedure has changed since then. When I did it, you could apply for residency in Mexico, there was no consulate process first.

You will have to attend the INM office yourself, because they take your fingerprints, although I can't remember at what point they do that. You may have to attend twice. I think you have to pick your card up in person and sign for it.

And you can't leave Mexico between the time you apply here and the time you get your residency card. If you really need to, you have to apply for a special permission letter. You really don't want to screw it up and have to start over. The INM office in Nuevo Vallarta is pretty easy to deal with and can tell you and your sister how the process will go, when you will have to attend in person, and the timeline. I'm not sure if a power of attorney would be acceptable for a private individual, like your sister. It may just apply to immigration lawyers and official facilitators. But again, INM can tell you that.

[Nikolai31]

Thanks Sarah, that helps. It’s good to know that at least for that period I’ll have to stay. Once back in Mexico, it’ll likely be easier finding out those things, and I’ll take you up on your offer of sharing your experiences, and anyhow maybe we meet some day, I’d love to hear how you fare with such a long time in Sayulita. Thanks again!

[Sarah977]

@Nikolai31  I was wondering if you're in town now, I'd drop by for a visit.  I think I know which place is yours on Libertad. I'm not too far from there- I'm out on the south side of the Punta de Mita hwy, past the bridge, and about a km down the dirt road.

[Nikolai31]

I’d love that but I'm in Berlin, late night, very far away. But I’ll be there some day soonish, I’m about to apply for a visa, with just one question open as to how, and should be there in six weeks hopefully or so. 

How come you know which place is mine? It’s the right two ones of the four white ones on the highest point, across from Webb’s place, you know him? The blue house is his.

[Sarah977]

@Nikolai31  I'll PM you here. 

[Nikolai31]

How does that work? Maybe you pm me right now so I know how and can pm you too?

[Sarah977]

@Nikolai31  I just did. You should see a red dot on your profile photo on the upper right hand corner of this page if you have a PM waiting, then  click on your profile photo there and "messages" in the drop-down menu.

[Sarah977]

@Karen3152  I responded to this duplicate post on the other thread you posted it on. Your understanding of Mexican residency is incorrect.