Working Online in Mexico – Are There Tax Obligations?

When is a digital nomad obligated to pay income tax in Mexico?

 

In an era of digital nomads, more people work online with the ability to live in any country they wish while maintaining employment. Countless foreigners working remotely have relocated to Mexico or are visiting for an extended time without becoming Mexican residents. When is a digital nomad obligated to pay income tax in Mexico?


Foreign non-residents are only taxed on Mexican sourced income.


Foreigners considered tax residents of Mexico are subject to ISR Impuesto Sobre la Renta- income tax on their income.


You are considered a tax resident of Mexico if:

  • Mexico is your primary home.

  • You spend more than 183 days a year in Mexico.

  • Your center of vital interests is in Mexico, meaning more than 50% of your income is derived from Mexican sources, and your main professional activities are located in Mexico.


Common Q&A about ISR- income tax in Mexico


I am here on a visitors permit, and I work online, am I considered a tax resident of Mexico?

No, you will not be considered a tax resident, and since your income is not generated in Mexico, you are not obligated to report this income to Mexico.

I work online in Mexico, but my income is generated and paid for by a company in another country. Do I need to pay income tax in Mexico?

No, if you work online with a company that is not in Mexico and your income is not generated in Mexico, you pay income tax to the country that pays you. However, if you are considered a tax resident of Mexico, you are obligated to report worldwide income.

I am teaching online while living in Mexico, but the company is in the US, with clients from all over the world, am I obligated to pay income tax in Mexico?

No, your income tax will be paid in the US. That being said, if you are a tax resident in Mexico, you will report this income but will not be double-taxed. If the school is located in Mexico, your income is from a Mexican company, then yes, you pay income tax in Mexico.

My employer, a US company, is concerned they will have some fiscal responsibility in Mexico by having me as an online employee living in Mexico. Does this affect them?

No, since they do not have a permanent establishment in the country and don't have income derived from the said establishment, they do not have any fiscal responsibility to Mexico.

I have a home in Mexico that I rent out online, but the guests make their payments directly to my Canadian bank account. Do I have an income tax obligation in Mexico?

Yes! Any income derived in Mexico is subject to income tax, no matter what country the payments are deposited.

Will my income from a Mexican property affect my Canadian income tax?

You will pay income tax in Mexico, but Canada, the US have an international double tax treaty, meaning the tax you paid in Mexico will be a deduction on your taxes back home.

If you have questions about tax obligations in Mexico, contact us at info@kananlawyers.com.

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