# Income tax



## skip8622 (Jul 16, 2016)

Does Mexico tax the retirement income of US citizens? :fingerscrossed:


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## joaquinx (Jul 3, 2010)

skip8622 said:


> Does Mexico tax the retirement income of US citizens? :fingerscrossed:


The tax agreement between Mexico and the US excludes the taxing of retirement income.


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## TundraGreen (Jul 15, 2010)

joaquinx said:


> The tax agreement between Mexico and the US excludes the taxing of retirement income.


Does that mean neither country will tax retirement income? Only in one's dreams.


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## joaquinx (Jul 3, 2010)

That's one reason I live in Mexico.


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## dancebert (Jun 4, 2015)

joaquinx said:


> The tax agreement between Mexico and the US excludes the taxing of retirement income.


How is 'retirement income' defined? SS and other pensions? Annuity payments? Withdrawals from 401k and IRAs, Roth or otherwise? Proceeds (from sale, capital gains, interest, dividends) of investments held in taxable accounts?


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## joaquinx (Jul 3, 2010)

dancebert said:


> How is 'retirement income' defined? SS and other pensions? Annuity payments? Withdrawals from 401k and IRAs, Roth or otherwise? Proceeds (from sale, capital gains, interest, dividends) of investments held in taxable accounts?


https://www.irs.gov/businesses/international-businesses/mexico-tax-treaty-documents

Sent from my Moto Maxx using Expat Forum


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## angelica_00 (Oct 31, 2016)

Thanks for the links to the documents, but none of that makes a lick of sense to me. I work remotely and am paid through PayPal. I have a friend who lives in Mexico who also works remotely. It seems PayPal now requires you to have a Mexican bank account (no problem for me) in order to get paid through them if you are using an Mexican IP. 

Does anyone know what the tax consequences are for working remotely being paid through a U.S. company? Would I have to pay Mexican taxes as well, because I already pay double taxes in the U.S. due to being self-employed.


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## maesonna (Jun 10, 2008)

Mexico and U.S. have a Avoidance of Double Taxation agreement.

Not being an American, I’m not sure of the details of how you do it, but I think that in broad strokes, if you have to both pay U.S. taxes and file a Mexican tax return, then you declare your U.S. taxes paid on the Mexican tax return so that you don’t have to pay the same income tax to both countries. If anyone here has actually done this, maybe they can tell you if I’ve described it correctly.

On the other hand, many have said that if you work remotely, you don’t have to be involved with Mexican income tax at all.


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## angelica_00 (Oct 31, 2016)

maesonna said:


> Mexico and U.S. have a Avoidance of Double Taxation agreement.
> 
> Not being an American, I’m not sure of the details of how you do it, but I think that in broad strokes, if you have to both pay U.S. taxes and file a Mexican tax return, then you declare your U.S. taxes paid on the Mexican tax return so that you don’t have to pay the same income tax to both countries. If anyone here has actually done this, maybe they can tell you if I’ve described it correctly.
> 
> On the other hand, many have said that if you work remotely, you don’t have to be involved with Mexican income tax at all.


I think you do if you're a Temporary Resident with a bank account and not a visitor. PayPal seems to be forcing people into this, or else I'd have to use a VPN to keep them from knowing I'm in Mexico. I've heard of them restricting someone's account for 6 months because of her IP being in Mexico and her having a U.S. PayPal account. Of course, she had been here for years, so they probably figured out she wasn't a visitor anymore.


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## eastwind (Jun 18, 2016)

maesonna said:


> Mexico and U.S. have a Avoidance of Double Taxation agreement.
> 
> Not being an American, I’m not sure of the details of how you do it, but I think that in broad strokes, if you have to both pay U.S. taxes and file a Mexican tax return, then you declare your U.S. taxes paid on the Mexican tax return so that you don’t have to pay the same income tax to both countries. If anyone here has actually done this, maybe they can tell you if I’ve described it correctly.
> 
> On the other hand, many have said that if you work remotely, you don’t have to be involved with Mexican income tax at all.


For US citizens, I think its the other way around. You pay whatever tax you owe to the foreign country, then you fill out your US taxes, and enter the foreign tax paid. That is used as either a deduction against your income or a credit against taxes owed.


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## AlanMexicali (Jun 1, 2011)

World wide income with the IRS means as an example: Your income in Mexico is taxed at 15% and it would be taxed at 20% if earned in the USA, then you will pay the IRS 5% of your taxable income to make it a 20% tax rate. This is how it was explained several times before with links to the IRS website.


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## eastwind (Jun 18, 2016)

I presume paypal is checking IP addresses in order to comply with anti-money-laundering laws passed for the wars on drugs and terror. Hiding behind a US-based VPN server is probably a temporary solution at best. Eventually , either the government will force paypal to insist you can't use a VPN or the government will crack open the privacy that VPNs provide and force them to disclose their customer's locations.

Another option would be to set up a US company, have the income from your work go to it, make yourself an employee of that company, and pay yourself a wage to a US bank account. That doesn't really make anything simpler, you'll have to file US taxes for the company as well as yourself. And you'll have to pay an accountant to do your company's taxes, probably. But the accountant might be able to deduct from the company's income some expenses that you are now paying out of pocket and not getting to deduct. It should also enable you to avoid having to pay any Mexican income taxes. 

To the extent that Mexican income taxes are at higher rates than US income taxes, you'll save money on taxes.


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