Income Tax in Mexico for Canadian Expats
How much income tax a Canadian expat must pay in Mexico depends on their tax residency, income level, and how many deductions and credits they can claim. Their claims are based on mortgage interest, charitable donations, retirement savings, medical expenses, and more.
Discover the world's top
health insurers.
Compare quotes with
a click of the button.
Mexico and Canada have entered into a tax treaty so that the same income is not subject to income tax in both countries. To benefit from that, Canadian expats must keep proof of relevant activities, including a tax return, a certificate of residence, and evidence of tax payment.
This is a general overview and does not constitute legal or tax advice. For tax matters, a qualified tax professional should be consulted for personalized advice tailored to your specific situation, just like we are the name you can trust for sound advice on securing health insurance in Mexico.
Your Income Tax in Mexico as a Canadian Expat
The first step in understanding your income tax liability in Mexico as a Canadian expat is determining your residency status. Mexican tax laws differentiate between non-residents and residents, and the tax rates vary accordingly.
Mexican Residents for Tax Purposes
If you have lived in Mexico for more than 183 days in a calendar year, you are a resident for tax purposes, and you will be subject to the graduated tax rates and brackets that apply to all Mexicans. These rates range from 1.92% to 35%, with higher incomes subject to higher tax rates.
The tax brackets in Mexico are determined by the concept of a “Family Unit” (Unidad Familiar), which encompasses the taxpayer, their spouse, and any dependent children under the age of 18 who rely on them financially.
For Canadian expats who are tax residents in Mexico, their Mexican income tax is calculated based on their worldwide income, and the tax bracket they fall into will depend on their income level. The taxable amount for a Canadian expat increases with each progressive tax bracket:
|
If your taxable income falls between (in MXN $) |
Your Mexican income tax is (in MXN $) |
| 0.01 and 8,952.49 | 1.92% of taxable income |
| 8,952.50 and 75,984.55 | 171.88 + 6.40% of taxable income in excess of 8,952.49 |
| 75,984.56 and 133,536.07 | 4,461.94 + 10.88% of taxable income in excess of 75,984.55 |
| 133,536.08 and 155,229.80 | 10,723.55 + 16.00% of taxable income in excess of 133,536.07 |
| 155,229.81 and 185,852.57 | 14,194.54 + 17.92% of taxable income in excess of 155,229.80 |
| 185,852.58 and 374,837.88 | 19,682.13 + 21.36% of taxable income in excess of 185,852.57 |
| 374,837.89 and 590,795.99 | 60,049.40 + 23.52% of taxable income in excess of 374,837.88 |
| 590,796.00 and 1,127,926.84 | 110,842.74 + 30.00% of taxable income in excess of 590,795.99 |
| 1,127,926.85 and 1,503,902.46 | 271,981.99 + 32.00% of taxable income in excess of 1,127,926.84 |
| 1,503,902.47 and 4,511,707.37 | 392,294.17 + 34.00% of taxable income in excess of 1,503,902.46 |
| 4,511,707.38 or above | 1,414,947.85 + 35.00% of taxable income in excess of 4,511,707.37 |
Note that the tax brackets for Mexican tax are subject to change each year. Staying up-to-date with any changes is crucial to ensure accurate tax calculation and compliance with the law.
Mexican Non-Residents for Tax Purposes
On the other hand, if you have not lived in Mexico for more than 183 days during the taxable year, you are considered a non-resident. Non-residents are taxed only on their income derived from Mexican sources according to the following table:
|
If your taxable income is (in MXN $) |
Your Mexican income tax is (in MXN $) |
| Not over 125,900 | Exempt |
| Over 125,900 but not over 1,000,000 | 15% of taxable income in excess of 125,900 |
| Over 1,000,000 | 131,115 + 30% of taxable income in excess of 1,000,000 |
Filing Income Tax Returns
Filing income tax returns in Mexico as a Canadian expat involves determining your residency status, gathering required documents, choosing a filing method, completing the declaration form, and making the submission. Failure to comply with your income tax obligations may result in penalties or fines.
The general steps to follow are as follows:
- Determine your residency status: As stated above, you must first establish whether you are a resident or non-resident for tax purposes based on the 183-day rule.
- Gather required documents: You will have to prepare the necessary documentation, including your passport, work permit, and documentation of income earned in Mexico. All documentation must be in Spanish.
- Choose your filing method: You can either file your tax return online using the SAT (Servicio de Administración Tributaria) website, or in person at a local tax office.
- Complete the Annual Declaration Form: Use the Formato de Declaración Anual (FDA) or Annual Declaration Form to report your income and deductions. It is advisable to seek professional advice from a tax professional or accountant fluent in Spanish to ensure accurate completion.
- Timely submission and payment: Submit your tax return by the deadline and pay any taxes that are still outstanding by April 30th.
Given the complexity of tax laws, the importance of accurate reporting, and the fact that tax rates and regulations tend to change often, it is highly recommended to consult with a professional advisor who specializes in Mexican tax laws and rules.
Ways to Minimize Your Tax Liability in Mexico as a Canadian Expat
As a Canadian expat living in Mexico, it is extremely beneficial to explore strategies to make the most of available deductions and credits. By making good use of these deductions and credits, and leveraging the tax treaty between Canada and Mexico, you can minimize your tax liability.
While it is always prudent to seek professional guidance to ensure that you are maximizing your tax benefits while complying with all tax obligations, one helpful habit is keeping thorough records and retaining receipts–this will ensure that you can claim all the deductions you are entitled to.
What follows are some practical tips and considerations to help you reduce your tax liability in Mexico as a Canadian expat:
- Take Advantage of Deductions and Credits: When filing your income tax returns in Mexico, be aware of the deductions and credits available to Canadian expats. These may include deductions for mortgage interest, charitable donations, and retirement savings.
Similarly, it is advisable to verify your eligibility for deductions pertaining to housing, education, medical expenses, and more.
- Utilize Tax Treaties, Deductions, and Credits: Familiarize yourself with the provisions of the tax treaty and take advantage of any applicable deductions and credits outlined in the treaty. This can help reduce your overall tax liability and avoid paying taxes on the same income in both countries.
To claim foreign tax credits, you will need to complete Form T2209, the Foreign Tax Credit form when filing your Canadian tax return. This form helps calculate the amount of foreign tax credit you can claim based on the taxes paid in Mexico.
- Seek Professional Guidance: Bear in mind that minimizing your tax liability as a Canadian expat in Mexico can be complicated because two tax jurisdictions are involved. It is advisable to seek professional advice from tax experts who specialize in international tax matters.
Types of Taxes for Canadian Expats
On top of the income tax, Canadian expats in Mexico also need to pay the value-added tax, capital gains tax, property tax, inheritance tax, and possibly some other taxes as well. Here is an overview of the key tax obligations of Canadian expats in Mexico:
- Income Tax (Impuesto Sobre la Renta, ISR): Income tax is the most significant revenue source for the Mexican government. It applies to both resident and non-resident citizens. The tax rates are progressive, meaning they increase as the income level rises.
- Value Added Tax (VAT): VAT is a tax levied on the purchase of goods and services. The standard VAT rate is 16%, with some exceptions for certain items like food and medicine.
- Capital Gains Tax: This tax applies to gains made from selling investments or property, such as stocks and real estate.
- Property Tax: If you own residential or commercial property in Mexico, you will be responsible for paying property taxes.
- Inheritance Tax: Inheritance tax applies to any inherited assets or funds transferred from one person to another.
While this article offers a comprehensive overview, it is not intended to offer professional tax advice. Tax professionals or qualified accountants should be consulted for personalized guidance to ensure compliance and optimize tax planning strategies.
Frequently Asked Questions
Are Canadian expats in Mexico required to pay income tax to the Mexican government?
Canadian expats in Mexico are required to pay income tax to the Mexican government. The tax rates and brackets depend on the expat’s residency status and income level. Mortgage interest, charitable donations, and retirement savings are among the items that can lower tax liability.
Does Mexico have a tax treaty with Canada?
Mexico has a tax treaty with Canada. The tax treaty between the two countries allows for the claiming of foreign tax credits, helping to avoid double taxation on the same income. Documentation of taxes paid in the other country is required to claim the foreign tax credit.
What taxes do Canadian expats in Mexico have to pay besides the income tax?
Canadian expats in Mexico may further be responsible for paying the value-added tax (VAT), capital gains tax, property tax, and inheritance tax. These taxes apply to the purchase of goods and services, gains from selling investments or property, property ownership, and inherited assets or funds.
Conclusion
In this article, we outlined the income tax obligations and calculations for Canadian expats in Mexico. We also introduced some ways Canadian expats can lower their income tax liabilities. You are now reasonably knowledgeable about the Mexican tax system as it pertains to Canadian expats.
In addition to learning about the Mexican tax system, it’s also crucial to secure sufficient travel insurance, expat health insurance, or international health insurance from one of the top insurers in Mexico to give yourself sufficient protection and peace of mind.
It is always a wise move to secure insurance via an experienced brokerage like Pacific Prime. Our 20+ years of experience and insight of insurance products allow us to find the best plan for your needs that also represents the best value for money.
What’s more, you can benefit from our advice and support at no extra cost than going directly to an insurer. The value of this support is most apparent when our client needs to make a claim because we will be there to help level the playing field and help secure a fair outcome for our client.
So, reach out to us for a consultation or quote, or a free, no-obligation plan comparison today!
Particularly if you are in Mexico for the long haul, you may be interested in learning about the best neighborhoods in Mexico City for expats and Mexico’s healthcare system. Armed with this knowledge, your life in Mexico will be filled with fulfilling adventures and happiness.
Since joining Pacific Prime, Martin has become even more aware of the gap between the true value of insurance products and most people’s appreciation of it, and developed a passion for demystifying and simplifying matters, so that more people get the protection they need at a cost they can easily afford.
In his free time, Martin attends concerts of various genres, and plays the violin with piano accompaniment he pre-recorded himself or played live by his niece.
- Short-Term International Health Insurance: What You Need to Know - July 9, 2025
- The Cost of Living in Brazil - July 3, 2025
- The Cost of Living in Costa Rica - July 3, 2025
Comments
Comments for this post are closed.
We'll notify you
when our team replies!