Airbnb & Vacation Rental Income Taxes in Mexico with an RFC

Disclaimer: This article is for general informational purposes only. We recommend that you evaluate your particular case with a trusted Mexican accountant, as tax laws and processes may vary.

If you are renting your property or earning income in Mexico, it’s important to understand your tax obligations. Mexico requires foreigners earning Mexican-source income to register with the Tax Authority (SAT) and pay applicable taxes. Here’s a simple overview of what you need to know.

Taxes That May Apply

If you rent out a property in Mexico, you are generally responsible for the following:

• IVA (Value Added Tax): 16% federal sales tax
• ISH (Local Lodging Tax): Varies by state (typically 3%-5%)
• Income Tax (ISR): Based on your net income, after allowable expenses

Owner Payout Example

In order to better explain how payouts to our property owners are handled, we came up with the following example where a guest reserved through Airbnb:

As a rental manager, Beach Please charges 20% commission, which would end up being $157.53 in this example. This means that the owner will receive a total payout of $630.11 USD, which includes their portion of the sales taxes.

Here is an example with VRBO, which includes also payment processing fees:

At Beach Please, we use dynamic pricing software to adjust nightly rates depending on the fees charged by each platform. This ensures that property owners receive the same net payout, no matter what platform the guest books on. For example, if a reservation on Airbnb is set at $100 USD per night, we would raise the nightly rate on VRBO to approximately $106 USD per night to account for the higher platform and credit card fees. This way, owners earn a consistent amount regardless of the reservation source.

What is an RFC and how do I obtain it?

The first step to pay taxes and meet your tax obligations is to obtain your tax ID known as the Federal Taxpayers Registry (RFC) with the Tax Administration Service (SAT).

1. Get Residency
First, apply for temporary or permanent residency at a Mexican consulate. Once in Mexico, visit an immigration office to get your residency card.

2. Get Your RFC
After getting your residency, make an appointment at the SAT office. Bring your passport, residency card, proof of address, CURP, and a USB stick. At your appointment, you’ll receive your RFC and digital files for taxes.

3. Start Filing Taxes
Work with an accountant to register your tax setup and handle your monthly and annual tax filings.

Important: You Will Not Be Double-Taxed

If you file taxes in another country, you should know that you will not be double-taxed. Mexico has tax treaties with 32 nations, including the U.S. and Canada. For example, in the US it is possible to apply foreign tax credits from taxes paid in Mexico to help reduce your income tax burden. Avoid being double-taxed with a document that your accountant can provide stating that you already paid taxes on your income in Mexico. Your “fiscal regime” is simply a system that the government uses to categorize you for tax purposes. Your accountant can help you determine the best category for you to minimize your tax burden.

Remember that there are a variety of expenses that you can deduct (depending on your tax strategy and economic activity), such as:

• Water bill
• Electricity
• Internet service
• Cleaning products
• Repairs
• Monthly HOA payments
• Furniture

It is important to keep all proof of expenses and get an official invoice (factura) under your RFC in order to reduce your taxable income.

Recommended Local Service Providers

• Taxes and RFC registrations: Equilibrium Tax & Law (https://en.equilibrium.mx/)
• Immigration help: KL Mexico Legal & Migration Solutions (facebook.com/KLMexico/)
• Helping foreigners living in Mexico: Saira Hernandez Attorney at Law (sairataylor@outlook.com)