MEXICO IVA TAXES

[One1]

Can AirBnb add Mexico as one of the countries where taxes [IVA] are calculated automatically.

Thanks

[Andrea9]

@One1

This is something that is initiated through a city or country and not by Airbnb. Governing entities afraid too many of their loyal subjects won't file their taxes usually get Airbnb to do it or else they threaten banning them or something to that extent.

[Simon104]

I was in Merida at my property last weekend when my manager called to say - "hey, The Villa is on the front page of the newspaper!"

Front page article in the paper on "is it a house, or a hotel" - driven by the local hotel association, basically demanding the Airbnb properties pay both local sales tax (IVA) and Room Taxes. Obviously, they are completely correct.

This is an issue that is going to develop and property owners need to take great care to ensure they are in compliance with Mexican business regulations and tax codes.

If you are renting property in Mexico and you do not have an official fiscal presence, you are not collecting and paying taxes, you are putting your property at great risk. Mexican tax authorities will wrap a building in yellow tape and close it down very quickly, don't let it happen to you.

[Simon104]

Read this article for a sense as to what is in the wind:

Firstly, if you're renting property in Mexico you had better be declaring income and paying taxes.

Secondly, if you do not posses the right type of visa to permit this activity you may soon find yourself in a world of problems.

http://www.theyucatantimes.com/2017/09/mexico-tightens-supervision-of-foreigners-visas-and-local-inc...

[Jaime142]

Hello! I was trying to find a closer answer on this topic but so far I found that Mexico City is the only place in Mexico where it’s regulated the renting of property since July 1st 2017. Someone know how it works? If applies also to other cities in Mexico? I would like to register in TAX office to avoid any risk with my property. I do love airbnb but want to do all correct to ensure the legality of this activity in Mexico and be clear with our guest. Thanks. 

[Sarah977]

@Jaime142Not true. While they may be more vigilant in Mexico City, you owe taxes to Mexico on any money you are earning anywhere in Mexico. IVA +occupancy tax + tax on your earnings.

[Jaime142]

Jesus( so, what is your practice Sarah? Do you declare? Any advice I would really appreciate. Thank you 

[Simon104]

Jaime,

You definitely need advice of Mexican tax professional. What you owe and how it is handled will depend on how your property is owned and titled, and what your personal tax status is within mexico (if any.)

If you're a Mexican resident, and/or your property is owned via a Mexican corporation you will need to pay IVA, room tax and corporate tax.

If you're a non-resident, and/or your property is owned via bank trust you might want to check out this company, who claim that they can assist you with the process of filing appropriate tax paperwork (I have no knowledge of the company, they are appearing in my news feed)

http://www.settlement-co.com/payment_of_tax.html

It appears that they have a process established for tax compliance for foreign owned rental real estate.

Hope that helps

Simon

[Andrew410]

All reservations have to pay the Mexican IVA taxation (in Cabo this is 16%) in addition to hospitality tax.  This is in addition to the income tax that you have to pay on rental income.  AirBnb are quite deceiptful in not providing any way for hosts to charge and collect the IVA taxation, duping many hosts into thinking that they do not need to pay it and creating an artifically low rate so their site gets preference.  Instead they advise hosts to collect the IVA separately when guests arrive.

All HOSTS be aware, that IVA (at 16%) and Income tax must be paid on all rental income.  If you are non resident then you will have to find an agent to represent you for SAT and will pay 25% on gross income (no deductions).  Resident or non-Resident you still need to pay IVA 16%.

AirBnb is totally operating inappropriately regarding IVA.

[Drew66]

I just saw an update on Airbnb, they now provide the ability for hosts to collect the IVA (16%) from the guests without having to bake it into their nightly price.  Well done Airbnb!   Hosts can now finally be legal and be competitive.  I am sure this will make those that don't charge and collect the IVA a target for Mexican tax authorities.

[Beth3508]

Hi Drew, See your post is from quite awhile ago but hoping you might pop up with an answer.  Do add IVA to my cost presuming I just go to accounts etc and add.  But from there does the IVA get paid out by AIRBNB(like the 3%occupancy rate) or do I need to still declare with my accountant?

[Mauricio318]

Andrew, not all rental income pays IVA in Mexico. The "Código Fiscal" specifies that only furnished rentals must pay IVA.

That being said, if you're on Airbnb you're most possibly renting furnished, so you should be paying: Hotel tax (in Mexico City, at least) + Income tax + IVA.

I totally agree with you on the fact that Airbnb is going about this the wrong (almost deceitful) way:  IVA is a sales tax charged to the guest, usually 16% on top of the total nightly rate + fees charged to him/her.  

The honest and fair way to approach this would be for Airbnb to automatically add IVA to ALL OF THEIR LISTINGS. 

Otherwise, those of us who comply with the law, need to deduct IVA from our rental income or, alternatively, add it to the nightly rate and risk being the most expensive home in the area (and renting less = less income).

I'm hopeful that the tax authority forces Airbnb (and other platforms) to add IVA to all their listings and make this an even competition ground for all.

As of 2020, every listing must pay taxes in Mexico, no matter if the owner of the house is national or foreign.

[Mariana313]

Do I have to pay IVA even if my bank account is in the US? Do I have to do any US tax related paperwork if I pay IVA in Mexico?

[Simon104]

My understanding is: IVA is chargeable and payable regardless of the currency in which currency is received, or where the funds are received.

If your property is in Mexico and you are receiving rental income you have to register and file tax returns to the Mexican tax authorities, that includes IVA.

Mexican tax authorities are becoming increasingly vigilant in this area. You should definitely receive advice from both Mexican and US accountants, there are very serious risks associated with non-compliance.

[Andrew410]

Absolutely!  All income from your AirBnb in Mexico is taxable with SAT and IVA.  SAT is regular income tax.  the IVA is goods and services tax and the host is required to collect it and remit it monthly.  Unfortunately AirBnb don't provide any way to charge for IVA tax separately so you have to build it into your price.  If they catch you they will likely just seize your property.

IVA is a tax deduction for your US taxes.  SAT is a tax credit for your US taxes.