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Garth

Do Residente Permanentes of Mexico need to fill out Mexican Income Tax?

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If I move to Mexico, and become a Residente Permanente, do I need to send in a Mexican Income Tax Form, even though I will have no income from Mexican sources, and still fill out a Canadian Income tax form each year, with Canadian retirement income?

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Except in US where unearned income (dividends, interest etc etc) are taxed world wide. Foreign earned income like a job has an exception from US taxes up to 80K USD or something like that not sure of exact number. While we don't fill out Mexican tax forms tax was paid on interest earned in your Mexican bank account for example as they take the money out directly if you look at monthly statement. We pay IVA tax 15.5% at the store but it is hidden in price. Look at WalMart receipt and it will show you this. So while we don't fill out Mexican tax forms we do pay taxes in Mexico.

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In some cases, sorry yes you do. A Residente Permanente can be classed a tax resident of Mexico, and like the US, Mexico taxes Tax Residents on worldwide income:

"Tax resident, if individuals whose home is in Mexico are considered to be resident for tax purposes and [are] liable for taxes on their worldwide income.

If the individual also has a home in another country, he will be considered tax resident in Mexico if the centre of vital interests is in Mexico. This is deemed to be the case if more than 50% of the total income in a calendar year is of Mexican source or if the centre of professional activity is located in Mexico.

Non-resident, if individuals fall outside of the above guidelines but will be liable for tax on their Mexican source income only"

http://www.capitaltaxconsulting.com/international-tax/mexico/mexican-income-tax/

But hey this being Mexico, depends on who you talk to. Tax enforcement is lax. Many live here fulltime, work online in the US or Canada, and never have or will file here. That is how its done frankly.

But the tax law has always been clear. It's just a question of how one wants to do things here when you get here.

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Ditto on that. You only pay taxes in the country where the money was earned.

Sorry, untrue. When I file my Canadian income taxes, I report the income from my Mexican small business. Canada will tax me on this at the Canadian tax rate minus the percentage of taxes I have already paid in Mexico, because they have a tax treaty and you can't be double taxed. I.e. if I am in a 15% tax bracket in Canada, and have paid 3% tax in Mexico on my Mexican earnings, Canada will charge me 12% on those earnings.

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Sorry, untrue. When I file my Canadian income taxes, I report the income from my Mexican small business. Canada will tax me on this at the Canadian tax rate minus the percentage of taxes I have already paid in Mexico, because they have a tax treaty and you can't be double taxed. I.e. if I am in a 15% tax bracket in Canada, and have paid 3% tax in Mexico on my Mexican earnings, Canada will charge me 12% on those earnings.

There is something seriously wrong with this picture!

Canada is making 12% on money that you earn in Mexico? but Mexico only earns 3% on it? For sure you're not being double taxed, you're being tax gouged.

I am willing to stick my neck out here and be wrong but "to not be double taxed means that you don't pay tax on something that you've already paid tax on."

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We paid state tax on US Federal tax in Oregon so not so unusual. How....In Oregon you are not allowed to deduct all your federal taxes after a certain amount so..... You should have seen the mess that was my taxes when I worked all over the world. My employer did my taxes as they were impossible to figure out for field workers. I had countries asking me how many days I was in so and so. Eventually tax laws changed worldwide to deal with folks travelling all around. It still happens for sports guys for example baseball players have to pay taxes in the cities they play in. Lots of folks pay taxes on taxes. Yes its wrong but it is reality. So glad now we only fill out Federal tax forms, Treasury department forms and commerce department forms. Easy Peasy compared to my previous paperwork.

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Sorry, untrue. When I file my Canadian income taxes, I report the income from my Mexican small business. Canada will tax me on this at the Canadian tax rate minus the percentage of taxes I have already paid in Mexico, because they have a tax treaty and you can't be double taxed. I.e. if I am in a 15% tax bracket in Canada, and have paid 3% tax in Mexico on my Mexican earnings, Canada will charge me 12% on those earnings.

From the Canadian/Mexico Tax Treaty

"Article 7 Business Profits

1. The business profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on or has carried on business in the other Contracting State through a permanent establishment situated therein."

Business profits earned in Mexico are NOT taxable in Canada however they do have to be declared on your statement of world income. You should talk to a tax professional who knows Tax Treaties and how they apply to Canadian Taxation.

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US Citizens may have to file in both countries. Center of activities, source of income and time spent in a country hold more weight than name of immigration document. Talk to a qualified accountant who knows the laws of your home contry, the country where your income is from and that where you spend a good portion of your time.

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If I move to Mexico, and become a Residente Permanente, do I need to send in a Mexican Income Tax Form, even though I will have no income from Mexican sources, and still fill out a Canadian Income tax form each year, with Canadian retirement income?

Garth:

I have PM'd you

Dave

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If you are Canadian, Canada and Mexico have a bilateral tax agreement that essentially means that so long as taxes are paid somewhere, you are OK. That statement is probably oversimplified so It is very important that you speak with a tax advisor qualified with expat experience before you come. Price Waterhouse, Deloite, KMPG etc all offer this kind of fee based advice. If all your income is made and remains in Canada, chances are you will be better off just filing in Canada as a non-resident. However, if your situation is more complicated then you may need to file in both countries for certain things. Most people end up choosing to file in one or the other country depending on their particular circumstances and usually decided on the basis of who has the most beneficial tax structure for their situation, usually that means filing in Canada is best. The worst thing you can do is decide what to do based on anonymous advice from a web board. - like this one.

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