# Moving to the DF - Relo questions



## ABCinATL (Jun 19, 2010)

Hello, I'm new to the board but have been a lurker for a while, in anticipation of a job relo offer.

So, I got the offer, and we are working through the details.

The HR representative leading my relo has never relocated a person from the US to Mexico, so I think I will be able to guide some of the discussions/negotiations.

I have a few questions I'd like to get input on from the board members if you wouldn't mind.

A bit of background:
I currently work for a multi-national company. They're relocating me to our Mexico City office. I am currently engaged to a Mexican citizen. Yes, we are very lucky that my work is willing to pay the bill to move us to where we wanted to live anyway! Important note: We are planning a PERMANENT move to Mexico with no plans to return to the US as it was our ultimate goal to get back to Mexico eventually.

Now, on to my questions:
1. I'm having a hard time understanding the offer in terms of what my take-home pay would be. Can anyone advise me on if there are payroll/income taxes in Mexico and if so, what the rates are? 
2. I've done some research and found that if you meet the test you can exclude about ~90k USD income on US IRS taxes. Does the foreign income exclusion include BONUS money? How are bonuses taxed from a US living in MX perspective? I know in the US they are taxed at almost 40% and am hoping this may be included in the exclusion but the instructions weren't clear.
3. Is my understanding correct regarding the housing exclusion? I am able to exclude both the ~90K via foreign income exclusion and ~45K (based on Mexico City)?
4. Does anyone have a tax person I can ask these questions to? US or Mexico based, English or Spanish speaking is fine.
5. From my previous reading it looks virtually impossible, or very expensive, to permanently import a car from the USA to MX. Is the problem with the paperwork or the cost or what? I know the relos done within the US include shipping one car, so I would expect something similar for my US to MX relo. That or I may be able to ask for an allowance in lieu of shipping a car.

If anyone has any lessons learned or tips they'd like to share regarding their corporate relocation I'd love to hear the input.

These are my initial questions, thanks so much for your help.

ABC


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## RVGRINGO (May 16, 2007)

Welcome to the forum.
As a retiree, I can't help with your business and tax questions, but I am sure that there are other forum members who will respond.
Meanwhile, I can offer some suggestions regarding your car:
You may temporarily import one vehicle and you will post a bond with your credit card to insure that it is removed from Mexico. It can never be sold in Mexico and you are correct; it is not practical or maybe even possible to permanently import it. As such, you would have to maintain its registration in the USA. So, in your case, not ever planning to return to the USA, I would suggest that you sell the car and fly to Mexico. You may then buy a car in DF and solve that problem, along with the restrictions on when you may drive a foreign plated car in DF, which might make it impossible for you to use it to go to work in the mornings before 11:30 AM. Of course, there are other 'hoy no circula' rules that you'll have to learn.
Your company will certainly help you with your visa 'credencial' after you enter with the temporary FMM permit, but you may also want to 'upgrade' to the 'inmigrante familial' as the spouse of a citizen. That will shorten your eligibility to become 'inmigrado' or naturalized, so that you won't have to bother with immigration matters after a couple of years.
Good luck with the move and welcome to Mexico.


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## ABCinATL (Jun 19, 2010)

Thank you, RVGRINGO. I really appreciate the reply. The information regarding the car makes sense. I am coming to the conclusion that it is not really a possibility to permanently import a car, so I think it is best that we sell ours here and start over in Mexico as you suggested. 

If there are any other board members that can help with the tax related questions I would really appreciate it.

You are right in saying that my company will be sponsoring my Visa. I do hope to gain naturalized status in a few years after our marriage.

I'm looking forward to the move and as other questions come up I will be sure to solicit the input from the forum, I can see there is a lot of valuable information here.

Thanks again and keep the replies coming! 

ABC


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## conklinwh (Dec 19, 2009)

I've had multiple overseas assignments from a multi-national but none in Mexico. The tax deal with our company was to make the assignment "tax neutral" re:home net salary.
Specifically, if my taxes were say 40% of gross salary, then I would still receive the 60% of gross from home country salary plus the assignment additions.
The additions in my case were:
-Overseas living expense-This was an amount calculated to be what the additional costs would be and I received at the equivalent of tax free. This was calculated based on relative costs of leaving and assignment locations.
-Housing-Based on the pay grade and number of assignment family members, we were given a monthly target where we could rent or the company would rent for us. You didn't say whether you were selling a place but in my case we had option of maintenance expenses or a sales assistance.
-Furnishings-There were two types of assignments. A large furnishing move where company would pay for the total household good shipment or a minimum/personal effects move where I was given a furnishing allowance to spend.
-School-Assume that you don't have kids but schooling costs also covered.
-Transportation-None of my assignment locations had the option of bringing a car so in some cases I was given a transportation allowance and in others was given access to car & driver. Would think that given the car difficulties in DF in terms of when can drive, the traffic & parking that option of selling car in US and negotiating some sort of transportation allowance if needed for your job makes sense. You then have time to sort out car needs.
-Spouse-Our company treated spouse as "trailing spouse" in that assumed wouldn't work in assignment location and therefore provided no job assistance. In your case, seems not to be a problem.
-Language Skills-You may be fluent in Spanish but the cost of language schooling also normally a benefit.
-Tax Prep.-Not sure if you have made your future plans known as part of your job negotiation but my suggestion is if you haven't, don't. I've seen a number of cases where people on assignment had no plans to return. Those that kept future plan of return open, were treated by their companies as expats and could get all of the above, including tax prep assistance to ensure that you really only paid based on your salary in the US. Not sure if bonus you mentioned was part of US compensation or assignment bonus. If latter, I would try to have your company make tax free to you as with all the assignment allowances. By the way, the paper earnings to cover this were huge.
In cases where people said that they planned to make the move permanent upfront, the company often treated this similar to a transfer in the US and people almost became local, in this case Mexican, employee at a significant reduction in benefits. BTW, the US is one of two countries in the world that keeps tax hooks in passport holders living and working abroad.
Not sure how relevant to your case this is but hopefully some use.


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## ABCinATL (Jun 19, 2010)

My situation is a little different than what you described. Basically there is a new job position created and I am the perfect candidate for the job, and I just happen to want to move to Mexico. It is a win-win situation.

My company said they're planning on covering the relocation expenses. To what extent, I'm not sure, though I am absolutely aiming at a "tax neutral" position for the move. I'm planning on at the bare minimum some temporary housing, shipment of my household goods, shipment of a car if possible and if not, an allowance hopefully. Spanish classes and a miscellaneous allowance are also on my list. I'll be selling a house in the US and hope to not take a loss, but it is possible, so if that is the case some help offsetting that would be nice, but I don't expect it.

In terms of salary, this is not a temporary move, so I will be paid by the local office in Mexico what they deem is the market rate for the position. I will probably be taking a small pay cut, but net-net, I still think I may come out ahead given the cost of living there versus here (I have done a lot of research including local market prices for many goods/services using local prices in the DF given to me by local resources there).

Overall I think I will be ok, but am still struggling on the tax part. I'm going to talk to the HR rep this week and see if we can figure something out to keep it from being a tax burden on me. I know she has no experience with US taxation so that is my hesitation - I'm trying to get in touch with a tax expert on this subject so I will have done my homework before we talk.

Thanks everyone for the info.

abc


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## RVGRINGO (May 16, 2007)

I see a few areas of concern:

Only you can import your car, so shipping it is impractical. It will be a temporary importation and you can never, ever, sell that car in Mexico. You will have to maintain your US registration and will be restricted on when and where you can drive it in DF. You can't register it in Mexico. That's the reaI pain in the butt. If it dies, you still have to get it out of the country. As such, and since you plan to remain in Mexico, I strongly suggest that you dispose of the car and purchase a new one in Mexico, once you get your INM visa and an address.

If you are paid in Mexico at Mexican wages, you can probably expect a serious pay cut. Taxes will be due in Mexico. You should negotiate that ahead of time. You will see little change in your cost of living, especially if you plan on purchasing any imported food or clothing from the USA; all those familiar things. You will be in a major city with many prices similar to the USA. In fact, you may find a car impractical for daily use.

Your company should purchase your house at market value and not leave you 'hanging'.

You will definitely need a tax expert with international experience, preferably with situations like yours.


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## ABCinATL (Jun 19, 2010)

I figure that the car import thing is a point of negotiation. My boss relocated (on the company's dime) from NJ to GA last year and the company paid over $5000 to ship one car. Part of the standard relocation package includes shipment of one car, so I plan on asking them about it, letting them discover that it is not possible, then asking for an allowance in lieu of the car shipment. In all honestly I think it is best this way, we get to sell our cars in the US then buy something locally once we are in the DF.


I currently have X base salary plus I'm eligible for a bonus up to 15%. They have offered me a base salary that is about 25% less than what I make here, but have offered to increase my bonus structure to 25% and to cover my relocation costs. In all, it is not a terrible offer. I would just like to understand the mexican tax structure and US tax treatment better. I have a call later with an international tax advisor.

We plan on integrating into the Mexican culture. My fiancee is from the DF so that should help things 

Thanks
abc


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## RVGRINGO (May 16, 2007)

Be careful that your 'advisors' and 'shipping experts' know what they are talking about. Before you can ship any of your belongings to Mexico, you must have the appropriate visa and a 'menaje de casa'.


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