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Airbnb started to retain taxes in Mexico after October 1st

It’s very common for a lot of people to buy a property in Mexico nowadays. The prices are quite affordable, and with many tourist locations like Puerto Vallarta, it makes sense to rent these properties via websites like Airbnb and make money. After all, investors see a very good return on their rentals, both for the long and short term. It’s important to keep in mind the Mexican tax obligations regarding rental properties.

What tax obligations are there in Mexico for rental properties?

The thing to note here is that every rental property that’s physically located in Mexico owns tax on the rental income. Even if you’re paid online and the money never enters Mexico, if you rent a property in Mexico via Airbnb or VRBO, then you are forced to pay taxes here. If it gets a bit confusing, that’s because Mexico decided to tax everything, regardless of where the money comes from.

If the action that generated the income is from the country, then you have to pay taxes for it and that’s it. The law was updated June 1st this year in order to cover these digital rental platforms like VRBO and Airbnb as well. If you’re working with them, then the platform must be required to retain a portion of the ISR income tax funds and the IVA.The amount they need to retain is based on the amounts received. All those funds will be submitted to a retention record you can use against the Mexican Taxes.

However, if you are receiving rental funds via your own marketing efforts, you just need to file taxes as normal. This doesn’t apply to any Mexican corporations; however, they continue to declare taxes as always. The system is applying only to those individuals and foreign legal entities that use Airbnb or VRBO to rent their properties.

Does this make the accounting process more difficult?

Due to this law taking affect, Airbnb actively started to retain taxes in Mexico starting with October 1st. This is not something you can opt out of, if you use the platform to rent any type of property in Mexico, Airbnb will take taxes for you, and then you can file as instructed above.

The move is interesting, and it’s the first time Airbnb is forced to retain taxes in a country. We are asking ourselves if this will be a new requirement in many other countries. What we do know is that the process itself can be confusing, which is why it can be a very good idea to hire a professional. This will help eliminate concerns and really focus on the best results.

You will not have to worry about managing your income on your own, thus saving a lot of time and money. We encourage you to get in touch with our team of Mexican accounting experts right away if you need professional assistance whenever you choose to rent a property in Mexico and pay taxes properly for it!