Income tax in Mexico

[What the .... ?!?!]

How does Mexico find and tax the earnings that their citizens earn in the US?

[Captain Amazing]

I'm not a Mexican tax attorney, but I believe that non-resident Mexican citizens are only taxed on income earned in Mexico. So if you're a Mexican citizen living in the US, and you've only earned income in the United States, you don't owe any Mexican income tax, although you may owe US income tax.

[What the .... ?!?!]

If that is the case...... why would they leave that source of revenue off the table?

Do they have a means to get at it when transferred to relatives in Mexico or is there a big sales tax?

[Myglaren]

It is the same here, any UK citizen working in another country only pays income tax in the country they work/reside in.

My son in law was a merchant marine captain and was always offshore for at least six months of the year - he made sure to be! He paid NO income tax at all - or at least paid it then claimed it back in full

[Rumor_Watkins]

To tease this thread out:

The vast majority of countries in this world only tax income earned in their country - not on a citizen's worldwide income.

It's not that they wouldn't love to (not suggesting that it's entirely fair, though), it's that they practically can't. If they started doing it, their emigrated/expatriate citizens would drop their native, taxing citizenship like a hot potato once they could. It would be a bad thing in the long run for them.

There are few countries in the world who have the economic/social clout to make the cost/benefit analysis work out in their favor of surrendering your citizenship* versus keeping it and paying taxes. The US is one of those, because we're (for now) the best place to actually earn and invest those mega bucks - so giving up the right to participate in the US economy is very costly.

Anyways, probably even the countries that tax their citizens on worldwide income give you very generous exemptions on the first $X dollars of income, so that type of taxation only really affects the mega rich.




*note that in the US, they have some rules pertaining to surrendering your citizenship and still being liable for taxes.

[Driver8]

Originally Posted by What the .... ?!?!

If that is the case...... why would they leave that source of revenue off the table?

Do they have a means to get at it when transferred to relatives in Mexico or is there a big sales tax?

The United States is different from most countries in that it demands income tax of its citizens even if they are not residents of the United States anymore. Most other countries aren't interested in your foreign earned income if you are no longer a resident. This impacts me directly: my homeland and country of citizenship South Africa specifically exempts me from having to pay tax on my United States earned salary since I don't live there anymore. There were a specific set of rules that defined not being a resident (based on number of days out of the country in a tax year, including surrounding years, etc) that basically meant as soon as I left and started earning in the United States they weren't interested anymore.

If Mexico is similar then they wouldn't necessarily be interested in the income of the person who lived remotely. However, I am sure they will be interested in the income of the person living at home who receives this money.

[Giles]

This is the one big reason why I will not become a U.S. citizen, even though I'm eligible to become one: I intend to retire to Australia, and as a U.S. citizen I would have to pay tax on my Australian income, including a significant part which is tax-free in Australia.

[Snnipe 70E]

When did this change. When I got out of the maritime academy if you were living in a foriegn country for 18 months you were not liable for income tax.

I had a classmate who got a job on a selfpropelled oil rig as a third. His contract was for 24 months. One of the selling points was being a non resident of the us for over 18 months ment no income taxes even though the rig was American flagged.

[Rumor_Watkins]

Originally Posted by Snnipe 70E

When did this change. When I got out of the maritime academy if you were living in a foriegn country for 18 months you were not liable for income tax.

I had a classmate who got a job on a selfpropelled oil rig as a third. His contract was for 24 months. One of the selling points was being a non resident of the us for over 18 months ment no income taxes even though the rig was American flagged.

you get around 80k or so in foreign-sourced tax exempt income (obv. this was lower back in the day) so for most people they aren't liable for tax (but are still technically taxed on it)

as for the rig, there may be special IRS provisions for it, esp. if the rig was in some other national waters. or, your friend may have been mistaken.

[Snnipe 70E]

Originally Posted by Rumor_Watkins

you get around 80k or so in foreign-sourced tax exempt income (obv. this was lower back in the day) so for most people they aren't liable for tax (but are still technically taxed on it)

as for the rig, there may be special IRS provisions for it, esp. if the rig was in some other national waters. or, your friend may have been mistaken.

The rig was of the South American coast.

[OldGuy]

While it is true that the US taxes citizens (and permanent residents) on foreign income, if you live abroad you have an exclusion of up to (currently) $91,400 of your foreign earnings. In addition, you can often exclude a housing allowance or deduct housing expenses if you pay them.

If you look at the IRS sight I'm sure you can find the details or publication explaining this.

[Balthisar]

Originally Posted by What the .... ?!?!

How does Mexico find and tax the earnings that their citizens earn in the US?

Consider also that Mexico has a hard-enough time finding and taxing the earnings that its own citizens make right here in Mexico.

[No Me Ayudes Compadre]

Do they have a means to get at it when transferred to relatives in Mexico or is there a big sales tax?

There isn't a tax on inbound remittances, but to the extent that the funds are spent on taxable goods and services, the Mexican government does get its 16% VAT.

[Duckster]

Originally Posted by Driver8

The United States is different from most countries in that it demands income tax of its citizens even if they are not residents of the United States anymore.

This is incorrect. US citizens are subject to income tax regardless of where they live. However, the requirements to actually pay income tax on foreign income is mitigated by the foreign income exclusion. So unless your foreign income exceeds US$91,400, you pay no US income tax. You just have to file, meet the requirements, and then qualify for the exclusion.

[Balthisar]

Originally Posted by Duckster

This is incorrect. US citizens are subject to income tax regardless of where they live. However, the requirements to actually pay income tax on foreign income is mitigated by the foreign income exclusion. So unless your foreign income exceeds US$91,400, you pay no US income tax. You just have to file, meet the requirements, and then qualify for the exclusion.

I think that Driver8's point, though, was that most other countries don't even bother to make you do that much. You don't live there, you don't file. A sort of analogue is, just because I move from Michigan to Texas doesn't mean that I have to file Michigan taxes for the rest of my life (even if I end up owing nothing). A real example is that my Mexican wife has absolutely zero requirement to even so much as file in Mexico, although I still have to file in the United States.