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Tax on interest


Curmudgeon
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The current withholding tax rate (2019) applicable to interest payments is 1.04%, and the established withholding rate for tax year 2020 will be 1.45%

you will get at  end of the year a  statement from your Mexican bank called a constancia , showing interest earned and taxes paid in mexico.

usually comes in march

the bank files your taxes for you, you do not have to file a mexico tax return.

you can deduct they taxes paid on your USA 1040 form 1116

 

 

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9 hours ago, Curmudgeon said:

All I know is that on my statement, it lists interest credit, followed by ISR deduction. There most recent one worked out at 49%, but last month it was about 41%.

No I don't file taxes in Mexico.

Sorry if I sound dumb. Are you saying "  I have earned say 5,000 pesos but must pay 49% back to the MX government so I am left with approx 2,500 pesos!? " 

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"1.45%

For 2020, the ISR withholding rate will be 1.45%. In recent years, this tax has been increasing. In 2017, the rate was 0.46%; in 2018, 1.04%. According to lawmakers, the increase is due to average returns on public and private instruments and inflation. Dec. 18. 2019."

The new government increased the withholding rate on bank earned interest from .46 percent to 1.45 percent in 12 months. Withholding 41 percent or more seems odd. There might be a reason. If you find out let us know why this is happening, please.

They are withholding the 1.45 percent on my wife's accounts she said. She files every year and gets money back from various taxes she pays including income taxes on rentals we pay every 3 months at any bank along with the 16 percent IVA on the commercial rentals.

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1 hour ago, AlanMexicali said:

"1.45%

For 2020, the ISR withholding rate will be 1.45%. In recent years, this tax has been increasing. In 2017, the rate was 0.46%; in 2018, 1.04%. According to lawmakers, the increase is due to average returns on public and private instruments and inflation. Dec. 18. 2019."

The new government increased the withholding rate on bank earned interest from .46 percent to 1.45 percent in 12 months. Withholding 41 percent or more seems odd. There might be a reason. If you find out let us know why this is happening, please.

They are withholding the 1.45 percent on my wife's accounts she said. She files every year and gets money back from various taxes she pays including income taxes on rentals we pay every 3 months at any bank along with the 16 percent IVA on the commercial rentals.

Maybe I should be filing a Mexican tax return to get some of this rather high tax back.  Can anyone recommend a local English speaking Mexican tax guy who I could discuss this with?

Thank you!

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OK I went to Intercam and they acknowledged that the withholding rate on interest is 1.45%. so why are they taking out 49%?. No answer. I was told I had to email customer service and ask them. Obviously I was not happy being told it's my problem, and it showed.

On my way home I got a cellphone call to tell me that they would investigate on my behalf. That's a little better.

In the mean time I've looked through my statements for all of this year, and their take varied from 10 to 50%. Don't seem to correlate with anything.

I'll post if I get an answer. In the mean time, Intercam customers, check your statements.

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They withhold on the principal amount, not off of any earnings so it is possible to lose money

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The money they withold is 1.45% of your entire investment.  The interest they show is for the term of your investment, payable 30 days, 90 days etc.   The withold is only once a year or term.   I am assuming you just saw the peso values & worked out the % .  One has nothing to do with the other.

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I checked my last bank statement and noticed that the ISR deduction was 42% of interest earned for last month. Using some simple calculations, no compound interest etc., here’s what I determined.

Assume a balance of 10,000 MXN, earned annual interest rate of 3.0%.
Annual interest = 10,000*3.0% = 300 MXN, so monthly interest earned approx. = 300/12 = 25.00 MXN.

ISR tax of 1.45% on the principal amount = 10,000*1.45% = 145 MXN annual, so monthly is approx. = 145/12 = 12.08 MXN

As a percentage, ISR withholding = 12.08 / 25.00 = 48.33% (close to the 49% you’re getting).

Not a math expert, so correct me if I’m wrong.

The fluctuations you see are likely due to interest rates falling each month in Mexico and all over the world due to the pandemic. If rates fall next month, the ISR % will be higher than 49%. As Spencer mentions, “They withhold on the principal amount, not off of any earnings so it is possible to lose money.” I believe if bank interest falls below 1.45%, you lose money on your account. Given high inflation here, it’s even worse. Not a good time to have cash in Mexican accounts, especially if earning less than 1.5% in interest. But, NOB isn't doing much better either.

 

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 Like my cash that is here and the fact that I get interest paid to me[equal to 1 weeks grocery shopping] on a chequeing account. I am not interested in putting $'s  in investment accounts here or anywhere else so none of this worries me. I am curious as to why old people like me keep doing this investing nonsense which goes up and down like a yoyo.-SNORK!

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I don't need no more money "to fund a very good life here" and can even support some others less fortunate than I from time to time. If you did your due diligence for dough before coming here, to accumulate more at this stage in life and the worry about the market whilst doing it is nonsense. Wadda ya gonna do,line yer casket with it or leave all that extra to yer heirs? What's this about Chuy and Moy anyhow?

 

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You have a different philosophy. I respect that. I did my homework before retiring 12 years ago. Things have just worked out better than expected. Charities and our kids and grand kids will benefit.

And no Pedro I don't expect there will be a Uhaul attached to my hearse.

SunFan

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On 9/10/2020 at 9:51 AM, Kalik said:

The money they withold is 1.45% of your entire investment.  The interest they show is for the term of your investment, payable 30 days, 90 days etc.   The withold is only once a year or term.   I am assuming you just saw the peso values & worked out the % .  One has nothing to do with the other.

This I don't understand. I may be dumb, but ... I have a spreadsheet of all my 2020 statememnts. This is a checking account, NOT an investment. From this conversation have learned and accept the fact that the ISR is levied on the entire value of the account, not on the interest earned. I'm not sure how the ISR calculated, however (based on starting balance, ending balance, average daily balance ...), but it sure doesn't add up to 1.45%. It's about half that. I say "about" because it is certainly not consistent from month to month. The same is true of the interest, although I accept the fact that interest rates have gone down.

What is amazing to me is that nobody at Intercam can actually explain my statement to me. Two weeks ago they promised to get me answers "from Mexico City", but I'm still waiting.

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