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14% Tax On Rental House


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#1 Spencer

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Posted 22 May 2013 - 01:00 PM

Hello again,

If we are renting a house in Cozumel and are dealing direct with owner in the US, example I sent them the paid in full amount to there address here in the US. How is the Mexican Gov't assured they wil recieve the taxes?

Thanks
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#2 DebB

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Posted 22 May 2013 - 01:27 PM

There is no assurance but that is not for you to worry about. There are a number of ways that a foreign property owner may remit Mexican taxes now. That responsiblity is upon the owner and the concern is his.
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#3 Carey

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Posted 22 May 2013 - 01:47 PM

Correct. For example, it is common to hold a rental property in a corporation in which case the government knows all about it and is squeezing the peso until it screams on them.

It's none of your concern, however, as far as worrying about anyone coming after YOU if they haven't set up their biz correctly. You're not on anyone's hook or radar.
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#4 Spencer

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Posted 22 May 2013 - 02:17 PM

Thanks all, actually I was curious for future reference if we were to buy there and rent out.
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#5 Carey

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Posted 22 May 2013 - 03:10 PM

There are two ways for foreigners to own property within the restricted zone -- which is within ?? 30?? miles of the ocean.

#1. A bank trust known as a fideicomiso. It is a way to get around the law of foreigners not being able to own property. The bank technically owns the property and the foreign owner has a 50 year, renewable lease which can also be sold or inherited. There is talk in the Mexican congress of doing away with this. We shall see. If you own a property in a fideicomiso it cannot be used for any sort of income generating activity. Period.

#2. A corporation. You can make the property part of a corporation which you set up to do business in Mexico. Higher taxes, higher utility bills, monthly accountant fees. I think a lot of people who rent property in corporations are not making very much if any profit on the deal because of all the associated fees. I could be wrong. In fact, would like to hear from anyone who is doing this and happy that they are renting.

Also and here again I could be wrong -- you should consult with a Mexican lawyer versed in real estate law before making any decisions -- you can't live in your place if its owned by a corporation. And because its not your home, it is difficult but perhaps not impossible to benefit from the waiving or discounting of the capital gains tax at the time or resale.
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#6 Spencer

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Posted 22 May 2013 - 03:33 PM

Wow, Carey Thanks so much for all that info, had no idea about the distance from the ocean. That seems a long distance considering the size of the island, I imagine there are almost no dual couple ex-pats that outright own there homes on the island. Is this a good assumption?
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#7 DebB

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Posted 22 May 2013 - 04:17 PM

Mexico has made a part of this process much easier for foreign property owners than it used to be. Here's a concise overview -- well written even though it is an advertisement!

http://usexpatriate....tax-is-now.html
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