Remote work has become commonplace for foreigners and expats living in Mexico. And almost every such professional sooner or later has a question: should he pay taxes in Mexico if the source of income is abroad.
To understand, we should start with the basic principle of Mexican tax law. According to Article 1 of the Income Tax Law (Ley del Impuesto sobre la Renta, LISR), residents of Mexico are required to pay income tax on all their income, regardless of where the source of this income is located. In other words, if you are a resident of the country, then technically the Mexican tax office SAT has the right to demand a declaration and tax on all your earnings, even if the money comes from abroad.
However, real life is a little more complicated. If a person receives payments into foreign accounts and does not use Mexican banks, SAT has virtually no tools to automatically track such income. The tax service does not have direct access to accounts in foreign banks and payment services. For this reason, remote professionals who receive money in foreign accounts and do not deposit it in Mexican banks effectively remain under the radar of the tax authorities.
But if you want to work in Mexico calmly, legalize your income, use the banking system without the risk of blocking and, say, purchase a mortgage or loan, in other words, demonstrate your stable financial situation, it is better to understand the rules, register as a taxpayer and draw up a suitable tax regime.
So, you legally reside in Mexico, but work remotely for a foreign company or receive other income from abroad. You complete the work online and receive regular transfers into your Mexican bank accounts. In this case, from the point of view of Mexican law, your income becomes visible to the banking system and, accordingly, to the tax service.
As soon as money begins to arrive regularly in a Mexican account, the question of tax treatment arises. Formally, the obligation to declare income arises upon receipt of any income. In practice, many experts focus on a certain threshold. At the same time, there is no threshold, that is, you need to pay tax on any income.
For most remote workers, the most convenient option is the Regimen Simplificado de Confianza mode, better known as RESICO. It was created specifically for small entrepreneurs and individuals with relatively moderate incomes. The main condition for its use — his annual income should not exceed 3.5 million pesos. For freelancers, developers, designers, marketers, consultants and other experts who work online, this mode usually turns out to be the simplest and most profitable.
In the RESICO regime, the tax burden is actually estimated from two main taxes. The first — This is an ISR income tax, which is governed by the LISR law. Under RESICO, the rate is very low compared to the regular regime. It is equal to 1-2.5% of the actual income received. The system calculates the tax automatically in your SAT account. The tax is paid monthly, and if the income limit has not been exceeded during the year and all payments are made on time, the tax service considers the obligations to be finally closed.
Second tax — This is VAT (IVA), which is regulated by the VAT Law (Ley del Impuesto al Valor Agregado). The base rate is 16%. But for remote experts, there is an important rule here. If services are provided to a Mexican client and used in Mexico, the standard IVA rate of 16% applies. If the customer is located abroad and the result of the work is used outside the country, such an operation is considered an export of services and is taxed at a rate of 0%. It is for this reason that for most remote consultants the IVA is effectively zero.
Working from RESICO involves a fairly simple workflow. The entire process takes place through the SAT portal. When you receive income, you must issue an electronic invoice, called CFDI, in the same month. This is a digital invoice that records income in the system. Then the ISR and IVA declaration are submitted by the 17th of the next month. Even if the income was nil or the IVA was nil, a return must still be filed. In this case, it will simply be filled with zero values.
When working with foreign customers, an important question — how to prove that the services are actually provided to a foreign company and are used outside Mexico. The IRS usually looks first at the source of the bank transfer. If money comes directly from abroad by bank transfer, say via SWIFT, the situation is considered the most transparent, because the details of the foreign sender are visible in the payment data.
There are other ways to get paid for remote work. Let's say some experts use payment platforms like PayPal or Stripe. In such services you can usually see the country of registration of the payer or cardholder. This data can serve as confirmation that the service was provided to a foreign client.
Payment services like Wise, Payoneer or Revolut are also widely used to handle international payments. However, sometimes transfers within such systems are displayed as domestic transfers without indicating the foreign sender. In such cases, additional confirmation of the source of income may be required to avoid VAT.
Separate topic — cryptocurrency payments and P2P exchange. Here the situation is more complicated. If you sell cryptocurrency through a P2P platform and receive pesos on a card from another individual in Mexico, it has the potential to look like a domestic transaction within the country to the tax authorities. In this case, SAT is entitled to expect to pay IVA at the rate of 16% because the transaction does not appear to be an export of services.
In general, the main principle is quite simple. If you have the right to prove that you work for a foreign customer and the result of your work is used outside Mexico, your income can be processed with a zero IVA rate. Then, in effect, you only pay ISR income tax on a scale of 1-2.5%.
In standard work via bank transfers, it is usually sufficient to issue invoices to a foreign client. For this purpose, a special so-called generic RFC is used for foreign clients (XEXX010101000). Contracts and correspondence as evidence are usually not required for monthly reporting, however, during a tax audit, SAT has the right to ask for any supporting evidence, for example, an agreement with a customer, invoices or business correspondence.
Such audits occur infrequently, especially if all income is declared and taxes are paid regularly. But it is impossible to completely exclude the possibility of verification. Consequently, many professionals prefer to keep a basic set of documentation confirming the nature of the work and source of income.
To apply the 0% IVA rate, it is extremely important to correctly issue CFDI invoices. If they are filled out incorrectly or incorrect service export parameters are specified, the system has the ability to automatically detect the discrepancy. In this case, the tax service may request clarification or initiate an audit.
Let's summarize. If income from remote work comes through Mexican banks, the best solution is usually to register under the RESICO regime and regularly file declarations. The tax burden is considered relatively small, and the work becomes completely legal and transparent.