Understanding Mexico Tax Residency in 2019

Mexico, known for its rich cultural heritage and beautiful landscapes, has been a popular destination for expatriates and retirees. One of the key considerations for those planning to live or work in Mexico is understanding the country’s tax residency rules. In 2019, these rules were particularly important for individuals looking to navigate the Mexican tax system effectively.

What is Tax Residency?

Before diving into the specifics of Mexico’s tax residency rules, it’s essential to understand what tax residency entails. Tax residency refers to the legal status of an individual in a particular country for tax purposes. It determines which country’s tax laws apply to the individual, including income tax, estate tax, and gift tax.

Residency Criteria in Mexico

In 2019, Mexico’s tax residency rules were based on a combination of factors. According to Article 2 of the Mexican Tax Code, an individual is considered a resident for tax purposes if they meet any of the following criteria:

• Spends more than 183 days in Mexico within a calendar year.

• Holds a Mexican visa or permit that allows for permanent or temporary residence.

• Has a permanent home in Mexico, even if they do not live there full-time.

• Is married to a Mexican citizen and resides in Mexico.

Reporting Requirements

For those who are deemed residents, there are specific reporting requirements. In 2019, residents were required to file an annual income tax return, regardless of whether they earned income in Mexico or abroad. This return would include details of worldwide income, assets, and financial interests.

Non-Resident Taxation

On the other hand, non-residents in Mexico are subject to tax only on income derived from Mexican sources. This includes income from employment, rental income, and business profits. Non-residents must file a tax return if their Mexican-source income exceeds a certain threshold, which varied depending on the type of income.

Double Taxation Treaties

Mexico has double taxation treaties with many countries, including the United States, Canada, and the United Kingdom. These treaties help prevent individuals from being taxed twice on the same income. In 2019, individuals with income from both Mexico and their home country could benefit from these agreements.

Conclusion

Understanding Mexico’s tax residency rules in 2019 was crucial for anyone considering a move to the country. Whether you were an expatriate, retiree, or simply visiting, knowing how the tax system worked could help you plan your financial affairs more effectively. It’s always advisable to consult with a tax professional or financial advisor to ensure compliance with all relevant tax laws and regulations.