Watch out if you live in Mexico and have a bank account in the US!

The Tax Administration Service “SAT ” announced that as of January 1, 2020 changes will be implemented in the way of filing taxes and watch out if you are one of the people who work in the United States but live in Mexico, this information will be of your interest.

According to an article in Noticias Ya, if as a Mexican you make payments by means of transfers in a foreign account under your name and you do not declare it to Hacienda (Mexican department of treasury) and Public Credit, you can be subject to investigation by the SAT.

If the authorities do not see a statement by the same person in their systems, it is when the analysis or investigation process begins

said in an article Miguel Ángel Guillén de León, creator of Fiscal content in Concanaco Servytur and former department head at SAT Tijuana.

Jorge Pickett, a tax lawyer, explains that the information exchanged between the United States and Mexico is from the US accounts with amounts greater than $ 50,000.00, although it could also happen with any other account with a lower balance.

The best way to avoid problems will be to declare any transaction with the SAT. It should be noted that this does not mean that you pay double taxes, Guillen says that the taxes paid in the US can be considered in the Mexican calculation “so that I get less to pay or that nothing comes out to pay.”

People have reacted negatively after the announcement of instant billing, creating controversy in social networks. And there are more experts that shared their opinion like, Hamlet González, mentioned a month ago that the SAT had a hidden interest behind this issue, referring to the fact that this would make it easier for them to detect the “Fiscal discrepancies” in natural persons.

IS THE SAT REALLY SPYING ON ALL YOUR INCOME AND EXPENSES IN 2020?

As of January 1, 2020, the Tax Administration Service (SAT) will begin to implement changes in the way of presenting taxes both for Mexicans who reside and work in the country, and for those who work in States United but live in Mexico . Below we explain what you should know. 

If you live in Mexico but work in the US

After the change, if you are Mexican and the SAT realizes that you make payments through transfers of a foreign account in your name, without having a declaration in the systems of the Ministry of Finance and Public Credit, you may be subject an investigation. 

“ If the authorities do not see a statement by the same person in their systems, it is when the analysis or investigation process begins ,” said Miguel Ángel Guillén de León, creator of Fiscal content at Concanaco Servytur and former department head at SAT Tijuana. 

Once the SAT starts the process to analyze your expenses, you will receive a notification asking you to clarify the income you are receiving. 

In addition, due to FATCA, a binational fiscal exchange agreement, the SAT and the US Internal Revenue Service (IRS). They may already be sharing your information with each other. 

The tax attorney, Jorge Picket, explains that the information that is being exchanged between the two agencies is that of US accounts with amounts over $ 50,000. However, the possibility that this can be done in any other account with smaller balances is not ruled out.

That is why if this is your situation, what you should do is submit a statement to the SAT, to avoid fines or possible jail time. Although this does not mean that you will have to pay double taxes

” If I paid my taxes in the United States right now, those taxes can be seen in the Mexican calculation to leave me unless I pay or not pay out anything,” said Guillén de León.

Billing on purchases with cards

This is one of the changes that is causing concern among people, especially among social network users who talk about an inspection for card payments that will issue instant invoices with each purchase. 

Unlike what many believe, this modification does not mean that the Treasury will be monitoring all your income and investigating your finances every time you receive a payment that you are not considering in your statement. 

” It is important to note that the instant invoice is not designed and, therefore, will not be used to calculate the income of the credit card holder, nor determine tax credits for fiscal discrepancy, much less apply fines.”. 

During a press conference last month, the head of the Association of Banks of Mexico (ABM), Luis Niño de Rivera, indicated that the instant billing service will be integrated in the points of sale terminals, and that credit cards and debit will have taxpayer tax information. 

According to Niño de Rivera in the first stage the program will be voluntary, so you will have the option to decide whether or not you want to generate an invoice. In case you want to do it, you must enter your Federal Taxpayer Registry (RFC) at the point of sale terminal.

This billing will happen in purchases made in establishments that issue invoices and not in every movement you make with your card, that is, it does not apply to bank transfers or cash withdrawals. If you earn a salary, you pay taxes through the company where you work and if your employer files your tax return, you will not face too many changes.

However, if you have a business or earn a fee, you can use electronic invoices to make your return and even make deductions on expenses that apply, to obtain a tax refund. So the ideal would be to advise you with an accountant to help you carry out the process.   

The Treasury ensures that the change is not intended to contrast your income with your expenses; but get rid of billing to third parties, provide a way of immediate billing for all taxpayers and have a true record of expenses that are taxable. 

What Taxes Do Americans Pay In Mexico

Whenever we Americans move abroad, buy a rental property, or start an international business, we must deal with both US taxes and taxes in our new country. In this article, I’ll look at what taxes Americans pay in Mexico. This post should apply to most countries out there.

The starting point for this post is the fact that Americans pay US tax on our worldwide income, no matter where it’s earned and no matter where we live. There was hope in the industry that Trump’s tax plan would apply equally to individuals and multinationals. But, that didn’t happy and individuals are still stuck with worldwide taxation on our income. Big corporations only pay US tax on US source profits.

This also means that the best defense we ex-pats have against the IRS is the Foreign Earned Income Exclusion. If you’re out of the US for 330 out of 365 days or a resident of a foreign country, you can exclude just over $100,000 of salary income from your US tax return. Note that the FEIE does not cover capital gains or other passive income.

With that said, let’s take a look at what taxes US persons will pay in Mexico.

Paying taxes in Mexico when you are a foreigner can be more complicated than it seems. In most cases, you will require good and well-paid advice to avoid paying double and to stay in compliance. Americans have to pay taxes in Mexico when they reside abroad and earn income in Mexico, or when they have a permanently established business in the country.

Americans who are residents of Mexico and receive income in there are considered taxpayers and are taxed in the same way as nationals would be. Consequently, they must comply with the obligations that correspond to the regime for which they receive said income.

Keep in mind that you will get a foreign tax credit in the United States for taxes paid in Mexico. So, you should get a dollar for dollar credit in the US for these taxes. The purpose of the foreign tax credit is to avoid double taxation on the same income.

An American who lives in Mexico must understand the concept of tax residence when paying taxes. Nowadays Mexican legislation establishes that a foreign person or a company is a resident when he generates 50.1% of his income in Mexico.

Likewise, a US citizen is a tax resident of Mexico if they spend 183 days a year in the country. This 183-day standard is used throughout the world to determine tax residency.

When an American has a Mexican residence, he is obliged to pay taxes if he obtains income from the following:

  • Salary: money obtained from salaries and other benefits derived from an employment relationship, overtime, additional benefits, compensation, retirement, pensions, retirement insurance, bonuses, among others.
  • Fees: income earned by providing independent professional services, that is, not granted in a subordinate manner.
  • Compensations to members of councils, government administrators, curators and managers: salaries received by members of boards of directors, oversight, consultants, fees to administrators, commissioners and general managers.
  • Leasing of real estate: income for renting real estate as long as that property is located within the national territory.
  • Timeshares or tourist service contracts: for use, enjoyment, occupation or enjoyment of temporarily or definitively of one or more real estate or part of them for tourism, vacation, recreational or sporting purposes.
  • Disposal of shares: When income is obtained from the sale or disposal of shares or other securities.
  • Financial leasing: interests generated from leasing with option to purchase or with the right to participate when the good is sold to a third party.
  • Royalties, technical assistance and advertising: profits obtained through the use of patents, inventions, trade names, copyrights, by transmission of visual images, sounds or both.
  • Exempt interests: discounts for the placement of securities, payments made for the opening of credits, payments to a third party when there is an acceptance of an endorsement, profits from the sale of securities placed among the investing public, the income obtained by a resident abroad for the acquisition of a right or credit of any kind, present or future.
  • Prizes: lotteries, raffles,, betting games or contests of any kind.
  • Artistic activities, sports, or public shows: profits or income obtained by residents abroad that carry out sports, artistic or public shows in Mexico.
  • Dividends and profits distributed by legal persons: When residents abroad obtain income from profits distributed by legal entities residing in Mexico.
  • Sale of real estate: when income is received from the sale of some real estate that is within the national territory.
  • Construction, installation, maintenance or assembly in real estate, inspection or supervision: those who provide construction services, installation, maintenance, or assembly in real estate within national territory.

Residents are subject to Mexico’s income tax on their world income, regardless of their nationality. The Federal Tax Code establishes that a foreigner will be considered a resident of Mexico for tax purposes when his domicile has been established in Mexico, unless he has been physically present in a foreign country for more than 183 days, consecutive or not, in a calendar year, and is able to demonstrate residency for tax purposes in that other country.

In order to work within these tax laws, most Americans set up an offshore company. They use one structure to manage investments (usually an LLC) and one to hold their business (usually a corporation). Then they bring into Mexico only the income necessary to operate there.

Also, most Americans look to set up residency in a foreign country that will not tax their income. Because they’ll be spending time in Mexico, they also need a country that doesn’t have a physical presence requirement to maintain the visa.

Source: noticiasya.com, sandiegored.com, escapeartist.com

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