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In Mexico’s diverse business landscape, both individuals and corporate entities engage in a wide range of economic activities, including property leasing through popular platforms like Airbnb. To navigate the complex legal framework effectively, it is essential to have a comprehensive understanding of the differences between “persona física” (individuals) and “persona moral” (legal entities). This article aims to shed light on these distinctions and their significance in the context of conducting Airbnb activities in Mexico.

Persona Física:

The term “persona física” refers to an individual actively involved in economic activities on their own behalf. When embarking on property rentals through Airbnb as a “persona física,” the individual willingly assumes personal responsibility for all legal obligations associated with the venture. To start, it’s crucial to register your RFC (tax identification number). If you haven’t registered your RFC, hosting platforms are required to withhold the following:

  • 20% Income Tax
  • 16% Value Added Tax (VAT)

Additionally, you won’t be able to deduct expenses related to the lodging service. However, if you have registered your RFC with hosting platforms such as Airbnb, they will withhold a portion of your income and remit it to SAT as an advanced payment of your taxes. They will withhold:

  • 4% Income Tax
  • 8% Value Added Tax (VAT)

Nevertheless, it’s important to remember that this is a provisional tax payment, and you may be required to pay additional taxes. The income tax rate in Mexico is progressive based on income and can vary from 1.92% to 35%. The withholdings made by Airbnb are subtracted from the total calculated tax. Additionally, you will be able to deduct expenses related to the commercial activity of your rental property, meaning that the withholdings will be based on your profit, not your total income.

In some cases, you can choose to consider the initial withholding as a final tax payment, but this only applies if your income generated through digital platforms does not exceed $300,000 pesos per year. Additionally, you do not have to file a tax return.

Additionally, individuals are responsible for remitting any relevant local taxes, which may include the lodging tax in specific municipalities.

Liability and Risk Management:

When choosing to engage in property rentals through Airbnb as a “persona física,” one voluntarily assumes personal liability for any challenges that may arise during the rental period. This encompasses damages incurred by guests, injuries sustained on the property, and the resolution of potential disputes. Obtaining appropriate insurance coverage is a prudent step to protect
personal interests and property assets against potential risks.

Contracts and Agreements:

Operating as a “persona física,” individuals possess the legal competence to independently enter into contracts and agreements under their own identity. When listing a property on Airbnb, it is mandatory to wholeheartedly accept the platform’s terms and conditions and skillfully draft a rental agreement with guests. Ensuring that the rental agreement aligns with local regulations and
comprehensively addresses vital aspects, such as house rules, check-in/check-out protocols, and meticulous liability provisions, is imperative.

Persona Moral:

In Mexico, legal entities that own rental properties on Airbnb are subject to certain tax obligations. Below, we explain key aspects related to tax payments for legal entities operating in this sector:

Rental Income:
Profits gained from renting properties through Airbnb are considered income for the legal entity. This income must be accurately recorded and reported to the tax authorities.

Income Tax (ISR):
Legal entities are liable for ISR on the income generated from property rentals. ISR is calculated by applying the relevant tax rate to taxable income. Tax rates may vary depending on the company’s tax structure and income levels. ISR declarations must be filed on a monthly or annual basis, depending on the legal entity’s tax regime.

Value Added Tax (IVA):
In some cases, legal entities might be obligated to charge IVA to guests for hosting services. IVA rates can vary, and it’s important to be aware of the current regulations.

Fiscal Invoices:
Legal entities must issue fiscal invoices (invoices) for the hosting services provided through Airbnb. These invoices should contain accurate tax information and comply with legal requirements.

Accounting and Records:
Maintaining precise accounting records of income and expenses related to property rentals on Airbnb is essential. This will facilitate the filing of tax declarations and demonstrate the legality of operations to tax authorities.

A profound understanding of the distinctions between “persona física” and “persona moral” is crucial when embarking on Airbnb activities in Mexico. As a “persona física” one consciously shoulders personal responsibility for tax obligations, adept liability management, and independent engagement in contractual agreements.

In contrast, “persona moral” involves a legal entity bearing these responsibilities, potentially offering enhanced liability protection. Whether operating as an individual or a legal entity, it is paramount to seek professional guidance from legal and tax experts to ensure full compliance with Mexican legal regulations and statutes while conducting Airbnb activities.