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Got Questions? Dear Mextax Answers…

This week, we answer a question for someone who owns a rental property in Mexico but receives the rental payments into their personal account outside of Mexico.

Dear Mextax,

I purchased my rental property through my Mexican corporation, but I rent my property via Airbnb and all my income is received in my personal Canadian bank account. I pay income taxes on it in Canada. Is that a problem? 

Yes, it can be a problem. Mexican tax law states that if the source of income is in Mexico, income tax has to be paid in Mexico. The property you own is in Mexico and owned by your Mexican corporation, therefore you should be receiving the money into a corporate bank account in the name of the Mexican corporation. The bank account has to be included in the accounting records of the corporation and can only be used for transactions related to the corporation. The income will then be reported by your accountant in Mexico, not Canada. By not properly reporting the income in Mexico, you risk incurring fines by SAT (Servicio de Administración Tributaria), Mexico´s tax authority.

If you have a corporation in Mexico, it is important that you work with a qualified Mexican accounting firm who not only understands the tax laws but has experience working with foreigners investing in Mexico. Our team at Mextax has both the knowledge and the experience to assist you with any questions and concerns you have.

Please contact us for more information about how we can help you and your business succeed in Mexico.