Taxes In Mexico

Sept. 20, 2010

"Kathleen, so that your readers may understand, there is a reason why Panamanians (and all other Central and Southern Americans, for that matter), always say 'yes' when sometimes they should say 'no.'

"This is because, in their culture, it is deemed to be more rude to say 'no' than it is to say 'yes' and then not to be able to keep to your word.

"When invited to a party, for example, it is seen as better behavior to say 'yes,' even though you know immediately you cannot attend. An apology at a later date is considered better form than offending the host by immediately saying rejecting an invitation and implying that there may be something wrong with the host or the party.

"In the Northern Hemisphere, this may seem ludicrous...but when in Rome..."

-- Debbie Z., United States

***

"Kathleen, I read your correspondence with great interest, and I, like I am sure your other readers, am grateful for all the information you send out, which is most welcome, helpful, and informative.

"You speak a lot about Panama and Belize but not so much about Mexico. I am given to understand that, in Mexico, one has to pay tax on worldwide income. Is this correct? Is this a reason you don't recommend Mexico as strongly as Belize and Panama?"

-- Sid R., United States

Yes...and yes.

As a resident in Mexico, you must pay taxes in Mexico on your worldwide income. U.S. citizens can try to avoid double taxation (as they are also taxed on their worldwide income in the States no matter where they live) with the help of tax treaties and foreign tax credits for taxes paid in the other country.

You'd have to speak with a Mexico tax accountant regarding the Mexico rules specifically, but the only way around paying taxes in Mexico on all your worldwide income if you are a resident would be not to report your income from outside Mexico to the Mexican tax authorities.

I'm sure many foreign residents in this country take this route, but I don't recommend it, of course, and resident international tax expert Chris Rusch points out that "Mexico's tax authority is becoming much more aggressive addressing cases of tax avoidance."

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