Are you an Airbnb host in Mexico and unsure of what taxes you are required to collect from the guest and which taxes are you required to pay? We’ve put together this simple guide to help you understand the Mexican tax laws that went into effect in June 2020.
Please note: This is a guide and not an exact outline of your individual tax requirements. Please consult a professional, such as the team at Mextax, for a detailed summary of your tax obligations.
Summary of Applicable Taxes:
- IVA – Impuestosobreel Valor Añadido(IVA) is a VAT or Value Added Tax which is a goods and services tax. This must be applied to the rental cost and services offered and is charged directly to the guest. The tax rate for IVA is 16%.
- ISH -ImpuestoSobreHospedaje (ISH) is a lodging tax. Like the VAT tax, the lodging tax is charged directly to the guest.
- ISR – Impuesto Sobre la Renta (ISR) isan income tax. In the case of Airbnb or other digital platforms it is based on the profit earned from renting a property. The more profit you earn, the higher the tax rate. The tax rate for ISR can range from 1.92% to 35%
How to Pay Taxes:
VAT & Lodging Tax (IVA & ISH)
In the case of the VAT (IVA) and lodging tax (ISH), digital platforms such as Airbnb will collect the tax directly from the guest. However, you are responsible for then paying these taxes to the tax authorities (SAT). In some states, Airbnb will pay the lodging tax directly to the state. However, in other states, you are required to pay the state tax authority.
|Costs & Taxes||Amount (pesos)|
|Price of Rental||$10,000|
|Lodging Tax (2%)||$200|
|Total Charged to Guest||$11,800|
Income Tax (ISR)
Mexican tax authorities (SAT) require digital platforms such as Airbnb to withhold income tax as an advanced payment of taxes. Since this is a provisional payment, additional taxes may be due. If your annual income from rentals does not exceed $300,000 pesos per year, you may be able to consider this provisional payment as your final payment. In the above example, a rental income of $10,000 pesos in one month would generate a 4% income tax payment or $400 pesos.
Summary of Tax Payments:
|Costs & Taxes||Amount (pesos)||Description|
|Total Guest Charge||$11,800||Includes VAT & lodging tax|
|VAT withholding (8%)||$800||Airbnb withholds 50% of VAT|
|Lodging Tax (2%)||$200||Paid by you or Airbnb, depending on state|
|VAT and ISH
|$10,800||Guest total charge without VAT and ISH charge.|
|VAT withholding (remaining 8%)||$800||You pay directly to SAT.|
|ISR withholding||$400||Monthly income of $10,000 pesos generates a 4% ISR. You pay directly to SAT.|
How are ISR (income tax) and VAT Calculated?
This guide is applicable when you have an RFC registered with SAT and provisional payments are chosen.
ISR (Income Tax)
Income tax is calculated annually once authorized expenses are deducted for the fiscal year. The income tax rate is progressive based on income and can range from 1.92% to 35%. The higher your income, the higher the tax rate so it’s important to use a tax professional to ensure that you not only deduct applicable expenses but that you are requesting the appropriate invoices (called facturas) from your suppliers. Airbnb withholdings mentioned previous are subtracted from the calculated tax.
Example of ISR Calculation*
|Monthly Income Tax (ISR)||$450|
|Net ISR Tax Due||$50|
*This tax calculation example is applicable during annual returns and takes into account that Airbnb already withheld 4% of the income.
VAT (Goods & Services Tax)
Remember, VAT for your rental is charged directly to your guest. You can subtract the VAT you pay on your approved expenses and the VAT Airbnb withheld from your monthly VAT collections.
Example of VAT Calculation
|VAT on deductible expenses related to your rental||$640|
|VAT charged to your guests (monthly total)||$960|
|Airbnb VAT withholding (8%)||$800|
|Net VAT Payable||$160|
Important: This is a guide and not an exact outline of your individual tax requirements. For a detailed and complete analysis for your tax requirements when renting a property through Airbnb or other digital platforms, please contact our professional tax experts at Mextax.