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My wife and I will be relocating to Chapala.  My wife is a dual Citizen.   She has been in the US for 25 years and just a year ago was naturalized. She still has a mexican passport.  What advantages will we have her being a dual citizen?  Or will there be any advantages?

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She will not need a visa to go to the States otherwise very little.She will not get a !0% withholding on her earnings versus 30% and she can claim it back quickly rather than having to wait until the correct form are available... She will not have to go through the hassling of immigration in Mexico or US..

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11 hours ago, bmh said:

She will not need a visa to go to the States otherwise very little.She will not get a !0% withholding on her earnings versus 30% and she can claim it back quickly rather than having to wait until the correct form are available... She will not have to go through the hassling of immigration in Mexico or US..

Can you please explain what you mean in your sentence about withholding?  I can't understand what you are saying.

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If you have a non citizen e US will withhold 30% of your IRA for example or other earnings and you have to claim back what they owe you at the end of the year..The problem with that is that the paperwork to be able to file is always late so you cannot claim right away. I usually do not get my money back for 4 to 6 months.. another example of the abusive IRS especially on non citizens.. As I file jointly with my husband his tax refund  is held back as well.

I now withdraw from my IRA in December right before the end of the year otherwise it may take me 1 year and a half before I get my refund..

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The OP said that his wife is a US Citizen (naturalized), so I'm not understanding what this green card discussion is about (maybe my lack of knowledge on the subject!). And she is a Mexican National. Dual citizenship. So cannot the OP have a shorter/quicker and maybe less expensive route to Permanente due to his wife's Mexican citizenship?

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Yes, You will be able to apply for a residency visa under a different set of rules from other expats. Since you are married to a Mexican citizen, you may apply for your visa either at a consulate in your home country, or at INM in Mexico, after entering as a tourist. I suggest that you start the process at the nearest consulate, and then follow the normal procedure to complete the process in Mexico.  You can do so within 6 months of entering Mexico, then report to INM within 30 days of crossing the border.  You will need all of your personal documents in order, so I suggest that you contact the consulate in person, with your wife, to find out exactly what they will require.  Your wife should have both her US and Mexican passports, and other personal documents to prove your marriage is valid, etc.  You will apply under family rules, called Vincula Familiar.  Once you have your residency permit, you will be on a fast-track, if you follow the rules and apply, to get Permanent Residency (from INM), or even become a Naturalized Mexican Citizen (by applying to SRE after the specified time in legal residence).  As a Permanent Resident, you can work, with notification to INM. As a Citizen, you are free of INM, can work, vote, own land on the border or coast, etc.

Note that you should plan to get a Mexican car ASAP, then dispose of your US car in the USA, since Permanent Residents cannot have foreign cars, nor can citizens drive them alone.  It will save you a lot of hassles and expense.

Enjoy

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I have a couple of questions related to this thread: Like the original poster's wife, I have dual U.S.-Mexican nationality. My Mexican passport is very old, so when I've come to Mexico in the past it seemed simplest to enter as an American. But my wife and I are now thinking of moving permanently to the Chapala area.

 

If I can jump through the hoops at the Mexican consulate in the U.S. and get an updated Mexican passport, and then enter Mexico as a Mexican, would I have to file Mexican income taxes if I have no income from Mexico, but receive all income from the U.S.?

 

How should we deal with our U.S. registered car if I enter Mexico as a Mexican? As a Mexican, I believe (but maybe this isn't true) that I wouldn't be allowed to drive a U.S. plated car in Mexico, even though it is registered in my name and my wife’s. Or is there a way I could drive our U.S. plated car in Mexico, given that I also have U.S. citizenship? Would we be able to purchase Mexican car insurance for this car if I am on record as a Mexican who also has U.S. citizenship?

 

Many thanks for your advice!

 

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In Mexico, you ARE a Mexican and cannot own or drive a foreign vehicle. However, there are different rules for Mexicans with US residency; a green card, and I do not know the details.

Yes, you should always enter Mexico with your Mexican passport, and enter the USA with your US passport.

In any event, you will find it more convenient, less expensive and less of a target to drive a Mexican plated car; no matter what status you are.

I know you will make the wise choice.  ;)

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Thanks RVGRINGO. Since I was born of American parents and therefore have U.S. citizenship by birth, I don't need a green card to live in the U.S.

 

But I'm concerned if I enter Mexico and establish residence there as a Mexican whether I'm going to have to file and pay Mexican income taxes on U.S. income.

 

Since I'd have to continue paying U.S. income taxes anyway (as long as I want to maintain my U.S. citizenship), I really don't want to be in the position of filing taxes with TWO countries (one is more than enough!). (I know there is some provision for receiving U.S. credit for foreign taxes paid to certain countries, like Mexico.)

 

I think I've read that even Americans who are residents in Mexico are -- _in principle_, but so far not implemented -- liable to pay taxes to Mexico on income received from any country.

 

From what you wrote, if I enter Mexico as a Mexican and own a U.S. plated car as an American citizen, I wouldn't be allowed to drive it in Mexico?

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You are a Mexican when you are in Mexico, no matter what.  As such, there are restrictions, as noted above, and which you should confirm with Aduana; not just a border agent.  In Mexico, you cannot claim any special privilege as a US Citizen; in fact, you are prohibited from even getting assistance from the US conaulate or embassy in the event of difficulties.  To enter using your US passport does not change the situation.

The USA and Mexico have a tax treaty which protects you from double taxation, so you have no worries there.  Unless you have Mexican income, bank accounts, or investments (which I advise against), you will not have to file in Mexico if you retire there. You will have to continue to file with the USA/IRS.

Even Permanent Resident visa holders, retired expats, are prevented from owning or driving US vehicles in Mexico, except a vehicle owned by a qualifying immediate family member, or if the owner/importer is present in the vehicle.  Besides; US plates attract the greedy attention of transitos & others.

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On 1/19/2017 at 10:29 AM, RVGRINGO said:

You are a Mexican when you are in Mexico, no matter what.  As such, there are restrictions, as noted above, and which you should confirm with Aduana; not just a border agent.  In Mexico, you cannot claim any special privilege as a US Citizen; in fact, you are prohibited from even getting assistance from the US conaulate or embassy in the event of difficulties.  To enter using your US passport does not change the situation.

The above information is not correct. I have entered Mexico multiple times using my U.S. citizenship papers -- sometimes entering with my own U.S.-plated car, sometimes by air, but always as an American. The fact that I was born in Mexico has no relevance to the Mexicans: They accept my U.S. citizenship and that's the end of it. Aduana accepts my U.S.-plated car, my U.S. driver's license, my U.S. passport, etc. So do Mexican insurance companies, which insure my car as an American (never as a Mexican). I have also asked for U.S. consulate assistance as a U.S. citizen in Mexico, and immediately receive this help.

When you wrote:

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On 1/19/2017 at 10:29 AM, RVGRINGO said:

Unless you have Mexican income, bank accounts, or investments (which I advise against), you will not have to file in Mexico if you retire there.

Here I'm not sure this is right:

"Residents of Mexico, irrespective of nationality, are subject to Mexican taxation on their worldwide income of all types which must be included in an annual personal income tax return." [If my memory is right, this comes from http://www.mexconnect.com/articles/6-taxes-in-mexico; the article about Mexican taxation in Wikipedia, as I recall, says the same thing.

 

 

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The US-Mexico Tax convention does   not   automatically relieve Mexican citizens from paying Mexican income taxes on their US income.

The treaty instead says 2 basic things:

~ All taxes paid to the USA are credited against what the Mexican citizen owes to Mexico

and

~  Mexico agrees to accept all US exemptions, credits & deductions on US income.

The second item is critical,  because if your Social Security income is exempt (non-taxable) from US taxes,  then it is also exempt from Mexican taxes.

Still,   note Item 1:   Because Mexico has higher tax rates on income in the higher Mexican income brackets,   a Mexican citizen with US income (and no Mexican income) can still owe net Mexican taxes on that US income.

e.g.  The USA gives a big tax break on capital gains, by charging even the highest income earners a relatively small 15% gains tax.   A Mexican citizen who has significant US capital gains income, (say over $75,000 USD) could be in a 35% Mexican tax bracket.

In that case,  the Mexican (or dual) citizen has to pay the 15% US capital gains tax,  and then also pay a   net   20% tax to the Mexican government,    where the 15% paid to the US IRS is credited against the 35% Mexican taxes  =>   35% - 15% =  20% net tax rates,

In the recent past, (when the MXN peso was at about $13:1)  the Mexican tax rates were lower on pretty much all US income under $75,000 USD,

Now that the USD is worth $22 MXN pesos,   the Mexican tax rates may be lower on just the first $44,000 US dollars.    Hence, Mexican citizens likely owe Mexican taxes on any US Income above $44,000 USD ... but as always, check with a good international tax atty to confirm the latest tax rules ~ and to determine if any of your US income is exempt under some of the special categories of the US-Mexico tax convention.

The IRS definition of your 'Tax home'  and the Mexican ISR definition of your 'principle place of activity'  can also play a role.

See this article for details:   https://yucalandia.com/living-in-yucatan-mexico/comparing-tax-rates-and-tax-policies-for-us-earned-income-and-mexican-earned-income/

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Tecolote: 

I am pretty certain that, in the situations you mentioned above, you did not inform the appropriate authorities of your Mexican citizenship.  Had it been discovered, things might have been different.  Granted; that nobody is looking for it for any particular reason and you were accepted at face value. The devil is in the details whenever “shıt happens“. 

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My wife was born in Mexico, but is an American Citizen. She has always enter as an American Citizen and brings her car from the States. No problem with Embassy assistance. No problem with Mexico. No problems.

 

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It gets sticky with some Mexicans supposedly losing their Mexican citizenship due to acquiring US citizen ship over 20 years ago although worst case scenario they just sign a form and their citizenship rights are fully restored.  We have had cases where Mexican immigration does not recognize a US passport stating place of birth Mexico for proof of Mexican citizenship.  Aduana, however, has canceled car permits or denied extensions to people whose passport says place of birth Mexico and with the prior FM3 or no inmigrante immigration document. 

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1 hour ago, Intercasa said:

It gets sticky with some Mexicans supposedly losing their Mexican citizenship due to acquiring US citizen ship over 20 years ago although worst case scenario they just sign a firm and their citizenship rights are fully restored.  We have had cases where Mexican immigration does not recognize a US passport stating place of birth Mexico for proof of Mexican citizenship.  Aduana, however, has canceled car permits or denied extensions to people whose passport says place of birth Mexico and with the prior FM3 or no inmigrante immigration document. 

https://migration.ucdavis.edu/mn/more.php?id=2042

"Mexico: Dual Nationality, Politics

 

Beginning March 20, 1998, changes in Mexico's nationality laws took effect. Henceforth, Mexican citizens who naturalize in the US or elsewhere will generally retain Mexican nationality. Mexicans who had already naturalized abroad before March 20, 1998 could re-acquire rights as Mexican nationals.

There is a five-year window for the two to three million Mexicans who had already become naturalized US citizens to reacquire Mexican nationality, which is done by paying $12 for a Declaration of Mexican Nationality and then becoming eligible for a Mexican passport, which costs $65 for five years.

Since March 1998, an average of about 1,000 Mexicans a month who are naturalized US citizens have reclaimed their Mexican nationality. After Mexico imposed a $15 tax on foreigners who traveled beyond the border area in 1999, there was a slight uptick in applications; about one million Mexicans living in the US return to Mexico each year for visits, often in December. Mexico expects more to recover their Mexican nationality as the deadline approaches.

Mexican nationals have several economic benefits over foreigners, such as the right to buy property within 100 km of the Mexican frontier and within 50 km of the Mexican coast. Mexicans with dual nationality have to relinquish their right to US diplomatic protection when they exercise this land-buying right.

Until March 1998, Mexicans who became naturalized US citizens lost their Mexican nationality. This is no longer the case: Mexican-born people as well as their children born abroad can maintain their Mexican ties if they wish."

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Reading over the posts to this thread, what stands out for me is that there can be a definitive tax disadvantage in residing in MX as a Mexican if you have fairly high U.S. income (as Snowyco made clear). And, for U.S. citizens living in MX, Mexican tax law apparently applies to any U.S. expat who is considered to be a permanent resident of MX (someone who, in MX’s language, has his or her “center of vital interest” in MX). He or she would be taxed by MX on worldwide income, which of course includes U.S.-derived income. Since MX's tax rates for someone who has an income of above approx. U.S. $44K is a higher tax rate than the U.S.'s tax rate, the expat is going to pay a much heftier combined tax bill than he/she would residing in the U.S. -- See, for example, https://www.greenbacktaxservices.com/blog/expat-taxes-explained-living-mexico/

In other words, for a U.S.-MX dual-citizen, there would be a definite tax detriment of living in MX as a Mexican if your income is, referring to Snowco’s calculations, above about U.S. $44K. Similarly, there would also be a tax detriment (and the headache of having to file with IRS + Hacienda, too) for a U.S. citizen with that level of income who establishes permanent residence in MX.

In forums for expats who live in MX, the issue of MX taxation of permanent expat residents seems to be raised very seldom. The issue could certainly stop some people from moving permanently to MX. -- Is it the case that MX's Hacienda, at least so far, just doesn't go after expat permanent residents in order to collect taxes on their worldwide income, or that expats just don't file with Hacienda when they're legally obliged to under MX law, and they hope they won't be caught?

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On 1/21/2017 at 8:20 AM, RVGRINGO said:

Tecolote: 

I am pretty certain that, in the situations you mentioned above, you did not inform the appropriate authorities of your Mexican citizenship.  Had it been discovered, things might have been different.  Granted; that nobody is looking for it for any particular reason and you were accepted at face value. The devil is in the details whenever “shıt happens“. 

This is a red herring. I've made more than a dozen trips to MX over a period of more than fifty years, always entering as a U.S. citizen. Often, Aduana chatted with me about my having been born in Mexico; it was never a problem. Never a problem, either, with my U.S.-plated car, satisfying Aduana and MX insurance companies. -- What is your information based on or is it just an assumption that you think is plausible?

Jim Bowie's experience also confirms my own. It would go against international law if MX began to treat U.S. citizens who have U.S. passports differently just because they happen to have been born in Mexico.

Unless some of the participants of this thread who ought to know more from a legal standpoint can offer documentation to the contrary, there should be no need to be anxious about this.

Nobody's country of birth as shown on a passport can alone be used to prove that they are actually a citizen of that country of birth: For example, if you have a valid U.S. passport that happens to show that you were born in Latvia or MX or Argentina or other country, your U.S. passport is nevertheless proof that you are a U.S. citizen and legally you must be treated as one.

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