# Tax Equalization hypo tax Mexico



## jesfierro (Mar 17, 2018)

I am a US Citizen working in Oil & Gas Manufacturing Company in Mexico Border region. I have been working here for over 10 years now. My payroll comes from US and have all normal US and State taxes deducted until last year myself and few of other Americans now have to be on Tax Equalization/ Hypo Tax . My employer hired company appointed tax advisers, this would be first time. My questions my situation is different because technically I'm not a expat. I live in the U.S. side of border and commute to work across to Mexico daily and head back Home stateside every afternoon. Some what common in Maquiladora / Manufacturing sites in Mexican Border cities. The tax advisers online questioner keep on asking how long I lived In Mexico, Who is currently residing at the house in the United States? What is/was your host country living arrangement? These question are not for cross border commuter. I have asked tax advisers that I don't live in Mexico and are only at work 5 days a week minus U.S. holidays plus my 15 days vacation time. Tax advisers say that doesn't matter that for Mexico I reside in Mexico full time. I was hoping for some guidance if anyone has been in this same situation.


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## RVGRINGO (May 16, 2007)

Your situation appears to be quite unique; working in Mexico as a foreigner (red flag: no visa? No INM permission to work?), and Mexico wants to tax your income, which is already taxed in the USA. As such, you will not be double taxed, as there is a treaty to prevent that, and reporting in both countries will resolve that problem.
Interesting situation. Please let us know how it works out. The tax authorities, immigration authorities and foreign affairs authorities, in Mexico, do not coordinate well....hardly at all.


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## TundraGreen (Jul 15, 2010)

RVGRINGO said:


> Your situation appears to be quite unique; working in Mexico as a foreigner (red flag: no visa? No INM permission to work?), and Mexico wants to tax your income, which is already taxed in the USA. As such, you will not be double taxed, as there is a treaty to prevent that, and reporting in both countries will resolve that problem.
> Interesting situation. Please let us know how it works out. The tax authorities, immigration authorities and foreign affairs authorities, in Mexico, do not coordinate well....hardly at all.


I agree it is an interesting situation. My guess is that your last line is the only reason it works. He is probably in violation of Mexican law by working at a factory in Mexico without a visa that permits work, but he gets away with it because INM doesn't know about it.

One other issue tax-wise. He is not eligible for the foreign-earned-income tax exclusion because he resides in the US. But as, as you point out, any Mexican tax paid would be considered when calculating US taxes.


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## Isla Verde (Oct 19, 2011)

TundraGreen said:


> I agree it is an interesting situation. [ . . . ]He is probably in violation of Mexican law by working at a factory in Mexico without a visa that permits work, but he gets away with it because INM doesn't know about it.


I agree that this is an "interesting" situation for the OP. Or maybe not. Could his employer have some sort of arrangement with the Mexican authorities that allows him to work in Mexico without the proper paperwork?


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## TundraGreen (Jul 15, 2010)

Isla Verde said:


> I agree that this is an "interesting" situation for the OP. Or maybe not. Could his employer have some sort of arrangement with the Mexican authorities that allows him to work in Mexico without the proper paperwork?


You raise a good point. I think those maquiladoras near the border may operate under a special set of rules about cooperation between the US and Mexico.


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## AlanMexicali (Jun 1, 2011)

TundraGreen said:


> You raise a good point. I think those maquiladoras near the border may operate under a special set of rules about cooperation between the US and Mexico.


The new accountant is correct. He needs to pay Mexican taxes first [works in Mexico and is paid for that work] even if it is deposited in a US bank from a US Company. The tax rate let´s say is 15% in Mexico and 20% in the US for his gross income he will pay the 15% to Mexico and 20% - 15% = 5% more tax of his gross income to the IRS in the US - World wide income tax law. IMO hwell: No doublé taxation.


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## maesonna (Jun 10, 2008)

Isla Verde said:


> Could his employer have some sort of arrangement with the Mexican authorities that allows him to work in Mexico without the proper paperwork?


Since he mentions that his employer is engaging tax advisors for the first time, probably any prior arrangement or lack of arrangement is no longer relevant.


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