Tax Residency: The 183-Day Rule
Mexico uses the 183-day rule to determine tax residency. If you spend more than 183 days in Mexico during a calendar year, you may become a Mexican tax resident.
What Triggers Tax Residency
- 183+ days physical presence in Mexico in a calendar year
- Center of vital interests in Mexico (home, family, primary business)
- Mexican source income exceeding 50% of total income
⚠️ Important: Having residency status (Residente Temporal/Permanente) doesn't automatically make you a tax resident. It's based on physical presence and center of vital interests. However, spending 183+ days with residency status creates a strong presumption of tax residency.
Tax Resident vs. Non-Resident
| Aspect | Tax Resident | Non-Resident |
|---|---|---|
| Taxed on | Worldwide income | Mexican-source income only |
| RFC required | Yes | Maybe (for certain transactions) |
| Annual filing | Required by April 30 | Generally not required |
| Tax rates | Progressive (1.92%-35%) | Flat rates on Mexican income |
RFC (Tax ID Number)
The Registro Federal de Contribuyentes (RFC) is Mexico's tax identification number. You'll need one for many activities.
When RFC is Required
- Opening certain bank accounts
- Buying or selling property
- Working legally in Mexico
- Starting a business
- Renting property as a landlord
- Receiving income in Mexico
How to Get RFC
- Register at SAT office (Servicio de Administración Tributaria)
- Can also register online with e.firma (digital signature)
- Required documents: CURP, proof of address, ID
- Process is free
💡 Note: Simply having an RFC doesn't mean you're a tax resident. It's a registration number for transactions. Many people have RFC but remain tax residents of their home country.
Tax Rates (2024)
Mexico uses progressive tax rates for residents:
| Annual Income (MXN) | Tax Rate |
|---|---|
| Up to $8,952 | 1.92% |
| $8,952 - $75,984 | 6.40% |
| $75,984 - $133,536 | 10.88% |
| $133,536 - $155,229 | 16.00% |
| $155,229 - $185,852 | 17.92% |
| $185,852 - $374,837 | 21.36% |
| $374,837 - $590,795 | 23.52% |
| $590,795 - $1,127,926 | 30.00% |
| $1,127,926 - $1,503,902 | 32.00% |
| $1,503,902 - $4,511,707 | 34.00% |
| Over $4,511,707 | 35.00% |
US-Mexico Tax Treaty
The US and Mexico have a tax treaty that helps prevent double taxation. Key provisions:
Key Benefits
- Pension income: Generally taxed only in the country of residence
- Social Security: US Social Security is only taxable in the US
- Foreign tax credit: Taxes paid in Mexico can offset US tax liability
- Tie-breaker rules: Determines residence when both countries claim you
🚨 US Citizens: Unlike most countries, the US taxes citizens on worldwide income regardless of residence. You must file US taxes even while living in Mexico. The Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit can help reduce double taxation, but compliance is mandatory.
FBAR & FATCA (US Citizens)
- FBAR: Report foreign accounts over $10,000 aggregate balance (FinCEN 114)
- FATCA (Form 8938): Report foreign assets above thresholds ($200,000+ for expats)
- Penalties for non-compliance can be severe - don't ignore these requirements
Digital Nomads & Remote Workers
Working remotely for a foreign employer while in Mexico creates a gray area.
The Technical Position
- Tourist visas (FMM) don't permit any work, including remote work
- INM considers any paid work a visa violation
- SAT may consider income earned while physically in Mexico as Mexican-source
The Reality
- Enforcement has been inconsistent but is increasing
- Digital nomad visa discussions ongoing but no formal program yet
- Residente Temporal with a work permit is the proper legal path
⚠️ Trend: INM has begun targeting digital nomads more actively. See our Enforcement Tracker for documented deportation cases involving remote workers on tourist visas.
Property Taxes & Capital Gains
Annual Property Tax (Predial)
- Very low compared to US/Canada - often $100-500 USD/year
- Paid to municipal government
- Discounts for early payment (often 10-15% in January)
Capital Gains on Property Sale
- Taxed at rates up to 35% on gains
- Non-residents face 25% withholding on gross sale price
- Exemptions available for primary residence (with conditions)
- Consult a Mexican tax accountant before selling
Getting Help
Mexican tax law is complex. For anything beyond basic situations, consult professionals:
- Contador Público (CPA): For Mexican tax compliance and SAT filings
- Cross-border tax specialist: For US-Mexico dual obligations
- Immigration lawyer: For residency status affecting tax obligations
💡 Tip: Don't assume your US accountant understands Mexican tax law, and vice versa. Complex situations require specialists in both jurisdictions.