Residents Abroad

The Mexican Political Constitution in its article 31, section IV points out that all Mexicans are compelled to contribute to the public expenditure of the Federation as well as the state and city in which they live in, in a proportional and equitable manner described by law.

Although there is specifically no provision in the Constitution that directly forces foreigners to contribute to public expenditures, when they establish within the powers of the Union Congress, legislate regarding the foreigners’ legal status, they must also contribute in our country.

Now, to know whether or not there is an obligation to contribute to public expenditures, it is necessary to analyze some figures or factors that link the active subject (State) with the taxpayers in the tax relationship, such as: source of wealth, permanent establishment, and fiscal residence, the latter being the subject to be discussed on this occasion.

The following are considered residents abroad, regardless of their nationality or place of birth (individuals) or country of incorporation (companies):

 

Companies

The legal entities that would have established in a country other than Mexico the company’s main administration or its effective management headquarters.

Individuals

• When they do not have a home in Mexico.
• When they have a home in Mexico and another country, in the following cases:
  • When over 50% of the total income obtained in the calendar year is made in a country other than Mexico.
  • When they have the main center of their professional activities in a country other than Mexico.

 

However, why is it important to know if you are a resident abroad?

Because not only residents in Mexico are required to pay taxes; this obligation extends to residents abroad whose income comes from a source of wealth within the national territory. Residents abroad can obtain incomes in the national territory in several ways, for example, by providing their services, selling real estate, leasing movable property, selling shares, among others.

Thus, by being their source of wealth in the national territory are subject to tax obligations.

 

By which items should a resident abroad pay Income Tax?

 Salaries and fees.

• Payments to boards members, directors, auditors, and managers.
• Sale of real estate.
• Chattels leasing.
• Property Leasing.
• Timeshare tour service contracts.
• Sale of shares.
• Financial Leasing.
• Royalties, technical assistance, and advertising.
• Artistic, sports or public entertainment activities.
• The nonprofit distributable remnant of legal entities.
• Dividends, profits, remittances, and profits distributed by legal entities.
• Construction work, installation, maintenance or assembly in real estate, inspection or supervision.