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Hi. I (from the U.S.) am starting to make plans to move to Mexico long-term. But there is an issue I need an authoritative answer to, and despite my best efforts, I'm not finding anything definitive on the Internet.

Basically, I want to know if a U.S. citizen living in Mexico and doing remote work (freelancing and other) for U.S. people and entities owes Mexican income taxes. Many people say no, but my reading of Mexican tax law would strongly suggest that they do. Opinions are all over the map.

A lot of people advice just not worrying about it or asking too many questions, which I might be willing to do for a year, but not forever. Before I commit to pulling up stakes and moving to Mexico long term (or even permanently), I need to have a clear answer to this.

Any thoughts on how I could go about getting one? If you have suggestions for an attorney or tax professional in Mexico who could help me, I would love to hear them. (I speak Spanish, so language is not an issue.)

And if you are such a person yourself, I would be interesting in arranging a short consultation.

Thanks for any guidance.

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Azucena Bateman is a local MXN attorney who is the "go-to" for a lot of newbies.  She's experienced, qualified and I'm sure that she could help with your tax questions.  She's on Facebook, I think under "ABC Legal".  I highly recommend her.

 

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If you are an independent contractor who receives a 1099 and you are receiving your income deposited into a US account you have no worries. You can basically work anywhere in the world and the local entity would have no way of knowing you are receiving money in the USA while working online in their country, nor would the companies you are doing work for know where you physically are. 

If you are receiving your money in a Mexican account while working in Mexico you could well owe taxes in Mexico.  The good news is any taxes you pay in Mexico will lower your US taxes. 

Based on your questions one might ask if you are familiar with the income requirements for the  type of residency are you considering in Mexico?

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5 minutes ago, Mostlylost said:

You can basically work anywhere in the world and the local entity would have no way of knowing you are receiving money in the USA while working online in their country, nor would the companies you are doing work for know where you physically are. 

Thanks. Maybe I'm paranoid, but as I said, I'm willing to take the what-they-don't-know-won't-hurt-them approach short-term, but not if I'm planning to make living in Mexico. (And you might be surprised. There are cases of U.S. companies monitoring IP addresses to find out where their employees are working from. That's not an issue for me, fortunately.) 

5 minutes ago, Mostlylost said:

Based on your questions one might ask if you are familiar with the income requirements for the  type of residency are you considering in Mexico?

Thanks for mentioning that. An excellent point. However, it turns out that yes, based on savings rather than income, I would qualify for residencia temporal. That shouldn't be an issue. (Of course, if I were depending on the income from remote work to meet the requirements, that would open another can of worms. In that position, one would have to assume that the Migración people and the SAT people (or their computers) don't talk to each other.

And just in case there's any doubt, I'm not trying to avoid paying taxes I owe or get away with anything. I just want to have an official, clear idea of where I stand.

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Yes the chair you sit in a foreign country you pay taxes to

but also what ever income taxes you pay to the foreign country and can be deducted om your 1040 form 1116 when you file taxes

but if you file as a foreign resident you can avoid federal taxes but not social security taxes

you do not get to deduct foreign tax a salary since  you are not paying any tax fed tax on the income as a foreign resident 

you can get in serious trouble, if you  get caught, not filing in the country you live in

I know of a few that got caught, they paid an awful lot to there lawyer and to immigration court costs etc,  and had a tough time not getting deported.

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8 minutes ago, traderspoc said:

Yes the chair you sit in a foreign country you pay taxes to

but also what ever income taxes you and can be deducted om your 1040 form 1116 when you file taxes

but if you file as a foreign resident you can avoid federal taxes but not social security taxes

you do not get to deduct foreign tax a salary since  you are not paying any tax fed tax on the income

you can get in serious trouble, if you  get caught, not filing in the country you live in

I know of a few that got caught, they paid an awful lot to there lawyer and to immigration court costs etc,  and had a tough time not getting deported.

Okay, thanks for the reply, even though it makes no sense at all.

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2 minutes ago, daisy2013 said:

Go see Azucena Bateman. She is great and very knowledgeable   Her office is ABC Legal on 16th of September #11, office phone is 376-766-1654

Thanks. You're the second person in this thread who has mentioned her. I'm not actually in the Guadalajara area at the moment, but I will definitely try to get in touch with her.

I appreciate the guidance.

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14 minutes ago, Mopsy said:

I am a freelance translator, i.e., independent contractor.I get 1099s from my customers in the US and also have customers in Europe. My fees are deposited into a US bank. I am only required to file taxes in the US. Have been doing this for years. When I inquired about this when I came here (residente temporal, now permanente) and this was the. information I was given. No earnings actually involving Mexico, so I pay taxes in the US, using my Mexican address. This was confirmed by tax information both here and in the states. I was told that I am not breaking any laws. But there are tax people here who can give you advice.

Many thanks. I am in almost exactly the same situation, so I very much appreciate your reply.

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On 5/25/2021 at 7:09 PM, Future Retiree said:

Okay, thanks for the reply, even though it makes no sense at all.

If makes no sense you need help contact your an expat tax accountant so you get tax facts of living in a foreign  country, they can explain it to you in a way hat make sense to you

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On 5/25/2021 at 7:49 PM, Mopsy said:

I am a freelance translator, i.e., independent contractor.I get 1099s from my customers in the US and also have customers in Europe. My fees are deposited into a US bank. I am only required to file taxes in the US. Have been doing this for years. When I inquired about this when I came here (residente temporal, now permanente) and this was the. information I was given. No earnings actually involving Mexico, so I pay taxes in the US, using my Mexican address. This was confirmed by tax information both here and in the states. I was told that I am not breaking any laws. But there are tax people here who can give you advice.

You owe taxes on earned income to Mexico. Check the with SAT. You do not have pay tax on foreign  investment income. But you have to pay tax earned income.  Income you get from working in Mexico. Beware posting online that you are not paying tax in Mexico  that's not prudent. to discuss yur personal business on the internet.

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All governments want their share. But in todays remote working scenarios there can be different tax advisor opinions.

lets play a little.  EXAMPLE  A citizen of the USA who is a resident of Mexico who pays taxes in the US on earned income travels to Panama from Mexico.. In Panama he boards a plane for Buenos Aires. The plane lands in Rio de Janeiro before continuing on to Buenos Aires, While on the plane in flight he connects to a company in the USA using a US IP address and answers a complex scientific question thus garnering a fee of $10,000 US as an independent contractor which is sent to a bank in the US. While doing so he is flying over many countries.

Since US citizens are taxed on worldwide income he must declare the income in the US for tax purposes. 

Since he is a resident of Mexico does Mexico have a tax claim?

SInce he departed from Panama does Panama have a tax claim?

Since he was on Brazilian soil for a short time does Brazil have a tax claim?

Since he is landing in Argentina does Argentina have a tax claim? 

He now connects from his hotel in Argentina and uses a US IP address again and earns more. Since he was in Argentina when he earned the money does he owe Argentina taxes?

 

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Almost all taxation require a nexus, which can include business activities that are conducted without a permanent situs.  It's often 30 or 60 days in the US.  Sometimes the length of time is codified, sometimes it has been litigated and set by case law. 

There are lots of these issues between states....i.e., is there sufficient nexus to tax business activities in NY by a FL company if it does substantial work there for x amount of time (possibly at a client's location), without opening a permanent office in NY.  

The same general criteria could perhaps apply between countries as well??

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5 minutes ago, Bisbee Gal said:

Almost all taxation require a nexus, which can include business conducted without a permanent situs.  It's often 30 or 60 days in the US.

Thanks. As I (very much not an expert, which is why I asked the original question), Mexican law generally says that you almost always owe income taxes on income from Mexican sources even if you are a nonresident. Makes sense.

If you are a non-citizen resident of Mexico, you owe taxes on worldwide income (with possible exceptions for social security and possibly pensions).

Their definition of "resident" seems to be either that you spend more than 183 days in the country OR your "center of vital interests" is in Mexico (which I believe means main home, bank accounts, any brick-and-mortar business, etc.). If that is the case, you are probably a resident even if you spend less than 183 days in the country.

There is a tax treaty between the U.S. and Mexico which is supposed to eliminate the danger of double taxation, even though the U.S.  normally taxes citizens on worldwide income.

As far as I can see, the main concern for people working remotely from Mexico for U.S. companies (apart from the hassle and probable expense of figuring out the paperwork at tax time) is that for what would be fairly modest salaries by U.S. standards can be relatively high by Mexican standards, and since Mexican income taxes are progressive, Mexican taxes are likely to be higher for those individuals.

But, as others have pointed out, this is obviously an evolving situation. I don't think any of the law really contemplated the issue of remote work via the internet), and certainly nobody was expecting a pandemic. So it may well be (although I don't know this) that for practical reasons, the Mexican government has made a decision not to prioritize collecting taxes from people in this situation. 

But I really have no idea about that, and while I might not worry about things too much for an extra few months in Mexico, I wouldn't be willing to count on the situation's continuing this way forever.

Thanks to all who have replied.

 

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If a tree falls in the woods and there is no one there to hear it does it make a sound?

If you a US citizen and a Mexican  resident working online and receiving compensation from a US company that does not do business in Mexico, and you use a VPN with a US IP address, and your payment is received by a US bank ....   does it make sound in Mexico? And is there anyone who would hear it?

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29 minutes ago, Future Retiree said:

Thanks. As I (very much not an expert, which is why I asked the original question), Mexican law generally says that you almost always owe income taxes on income from Mexican sources even if you are a nonresident. Makes sense.

If you are a non-citizen resident of Mexico, you owe taxes on worldwide income (with possible exceptions for social security and possibly pensions).

Their definition of "resident" seems to be either that you spend more than 183 days in the country OR your "center of vital interests" is in Mexico (which I believe means main home, bank accounts, any brick-and-mortar business, etc.). If that is the case, you are probably a resident even if you spend less than 183 days in the country.

There is a tax treaty between the U.S. and Mexico which is supposed to eliminate the danger of double taxation, even though the U.S.  normally taxes citizens on worldwide income.

As far as I can see, the main concern for people working remotely from Mexico for U.S. companies (apart from the hassle and probable expense of figuring out the paperwork at tax time) is that for what would be fairly modest salaries by U.S. standards can be relatively high by Mexican standards, and since Mexican income taxes are progressive, Mexican taxes are likely to be higher for those individuals.

But, as others have pointed out, this is obviously an evolving situation. I don't think any of the law really contemplated the issue of remote work via the internet), and certainly nobody was expecting a pandemic. So it may well be (although I don't know this) that for practical reasons, the Mexican government has made a decision not to prioritize collecting taxes from people in this situation. 

But I really have no idea about that, and while I might not worry about things too much for an extra few months in Mexico, I wouldn't be willing to count on the situation's continuing this way forever.

Thanks to all who have replied.

 

SAT does require you pay taxes on earned income, there is no amnesty you mentioned

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On 5/25/2021 at 4:34 PM, Future Retiree said:

Hi. I (from the U.S.) am starting to make plans to move to Mexico long-term. But there is an issue I need an authoritative answer to, and despite my best efforts, I'm not finding anything definitive on the Internet.

Basically, I want to know if a U.S. citizen living in Mexico and doing remote work (freelancing and other) for U.S. people and entities owes Mexican income taxes. Many people say no, but my reading of Mexican tax law would strongly suggest that they do. Opinions are all over the map.

A lot of people advice just not worrying about it or asking too many questions, which I might be willing to do for a year, but not forever. Before I commit to pulling up stakes and moving to Mexico long term (or even permanently), I need to have a clear answer to this.

Any thoughts on how I could go about getting one? If you have suggestions for an attorney or tax professional in Mexico who could help me, I would love to hear them. (I speak Spanish, so language is not an issue.)

And if you are such a person yourself, I would be interesting in arranging a short consultation.

Thanks for any guidance.

Please look at price waterhouse cooper Mexico to tax answers, they explain it the best they can

but remember the definition of income by SAT ,  in most cases they mean earned income from working.

https://taxsummaries.pwc.com/mexico/individual/residence

if you work on the internet and sit in a chair in Mexico. then you are performing professional services in Mexico.

 

 

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This gets more complicated if you have an “Inc.” (Corporation), earning into a Canadian biz account, only telecommuting to your existing Canadian office, not yet a resident, and some of your freelance workers are in your home country.  Consult an attorney.  Just the cash flow paid from your home country’s biz bank account, to your Mexican account may be taxable (what you pay yourself).  But the taxes can be deducted away from your Canadian taxes.  There is conflicting advice if you spend only from your Canadian account at Mexican ATMs or debit, etc.  

Things are murky here - I’ve heard many say you’re not subject to anything in a situation like mine when just visiting and no residence/RFC/etc yet, but when there’s a path to residency and many months a year, get things properly squared away.    

Consult a tax attorney to avoid the mousetraps.  There are many hidden lines that trigger.  A one week stay in a hotel telecommuting to your existing job, blending into a office in your MX apartment with your MX bank account year round.  The red line occurs somewhere in between these two extremes, and you should know where the lines are.

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