Mexico income tax on Canadian pension payments

@Blackwatch  Exactly+ where do you park your money in Cayman's - what company. If I stay in Canada 50%+ of my pensions go in taxes. Only problem is getting my wife to move and my health to be stable. it sucks getting old.

@Blackwatch  Where in the Caymans do you park your money??? What company and what are the fees.

@Blackwatch  Exactly+ where do you park your money in Cayman's - what company. If I stay in Canada 50%+ of my pensions go in taxes. Only problem is getting my wife to move and my health to be stable. it sucks getting old.

- @mrpres

@Blackwatch  Most "temporary residents of Mexico" seem to continue to file taxes in Canada. if you are a full time resident of Mexico you must file a get out of Canada form (I forget its name) and they will not treat you nicely - be prepared to pay some tax.

@mrpres yes, a departure tax on assets sold. There are tax strategies to mitigate this. Selling your house a couple of years before you move for instance. 

@mexicogc  Thanks for the great infos.

Would you share your contact on who does you income tax in Canada as a non resident? (either via private email or directly on this website). We are in the process of becoming permanent resident of Mx and we are still searching for a good accountant in Canada (who is familar with the rules for Canadian non resident for income tax but aware of the Mexico bilateral agreemnnt) to file our income tax to get refunded from the 25% to 15 % Canadian tax witheld at source).

- @Captnflex

@mexicogc

Thanks again, great explanations

I found that form on Rec Can website  NR73 Determination of Residency Status (leaving Canada).

https://www.canada.ca/en/revenue-agency … /nr73.html

- @Captnflex

1- no mexican bank account 2- no mexican income 3- no property - we rent an apartment 4- we withdraw pesos at ATM using our Canadian bank cards5- no mexican credit card, we use our Canadian credit card

-@mexicogc

Can you own a car and still not pay income tax in Mexico?

Is this correct - you file Canadian income tax and are a temporary resident of Mexico and thus, can buy a car in Mexico. Sounds good except for the Canadian tax.

Hi "Blackwatch", Yes, you can by a vehicle but you need your residency status. The question now is will the dealer be required by law to have your RFC number thus linked to SAT and also required to identify the origin of the payment money or require a payment via a mexican bank. I, personally, know a foreigner that bought a motorcycle without having the temporary nor permanent resident status.

Adios y buen dia a todos, GyC

Hi "Blackwatch", Yes, you can by a vehicle but you need your residency status. The question now is will the dealer be required by law to have your RFC number thus linked to SAT and also required to identify the origin of the payment money or require a payment via a mexican bank. I, personally, know a foreigner that bought a motorcycle without having the temporary nor permanent resident status.


Adios y buen dia a todos, GyC
-@mexicogc

Thanks for the info. I meant importing my car. My understanding is I can import my used car duty and tax free with my permanent residence status.

I emailed "immigration to Mexico" out of Playa Del Carmen and Adriana said owning a car does not make you pay Mexican income tax.

Two more questions...if you don't mind.

1 - RRSP's - I think you mentioned these would attract Mex income tax? How do they know you withdrew if you don't own a house and don't have to file a Mexican tax return?

2 - If I only spend 2-4 months per year in Mexico after I receive my permanent residence and I rent a different place each year can I just give the immigration dept a post office box or do I have to change it every year or every time I rent a different place?

Thanks

Hi "Blackwatch", Yes, you can by a vehicle but you need your residency status. The question now is will the dealer be required by law to have your RFC number thus linked to SAT and also required to identify the origin of the payment money or require a payment via a mexican bank. I, personally, know a foreigner that bought a motorcycle without having the temporary nor permanent resident status.


Adios y buen dia a todos, GyC
-@mexicogc
Thanks for the info. I meant importing my car. My understanding is I can import my used car duty and tax free with my permanent residence status.
I emailed "immigration to Mexico" out of Playa Del Carmen and Adriana said owning a car does not make you pay Mexican income tax.

Two more questions...if you don't mind.

1 - RRSP's - I think you mentioned these would attract Mex income tax? How do they know you withdrew if you don't own a house and don't have to file a Mexican tax return?

2 - If I only spend 2-4 months per year in Mexico after I receive my permanent residence and I rent a different place each year can I just give the immigration dept a post office box or do I have to change it every year or every time I rent a different place?
Thanks
-@Blackwatch

Hi Blackwatch,

First, if you spend only 2-4 months a year in Mexico then you will never be considered a non-resident of Canada thus you will be taxed as a regular Canadian citizen.

Second, even if you have the permanent resident status in Mexico, importing permanently a foreign vehicle is expensive even if 10 year old and labour intensive based on friends a lot of foreigners prefer buying a vehicle directly in Mexico

(IVA + DUTY FEES and need the RFC number)

https://www.gob.mx/tramites/ficha/permi … ados/SE662

https://www.comercioyaduanas.com.mx/com … os-mexico/

Third, spending only 2-4 months in Mexico a year, you would then not be considered a fiscal resident for SAT Mexico since you wouldn't  be doing business in Mexico or living full-time.

Fourth, RRSP nor RRIF are not taxed differently if you are a non-resident fiscally for Canada but your provider might deduct a 25 % instead of the maximum 15% based on the tax treaty thus a refund from Revenue Canada Agency when filing your tax return.

Fifth, the INM requires a physical address for all foreigners and changes have to be done within 45 days of the change. https://www.gob.mx/tramites/ficha/notif … tes/INM829

On my part I have only one question:

1- what is your benefit for yourself to looking for permanent resident status in Mexico if your intention is not to live permanently in Mexico?

Buenos dias a todos, GyC.

Hi "Blackwatch", Yes, you can by a vehicle but you need your residency status. The question now is will the dealer be required by law to have your RFC number thus linked to SAT and also required to identify the origin of the payment money or require a payment via a mexican bank. I, personally, know a foreigner that bought a motorcycle without having the temporary nor permanent resident status.


Adios y buen dia a todos, GyC
-@mexicogc
Thanks for the info. I meant importing my car. My understanding is I can import my used car duty and tax free with my permanent residence status.
I emailed "immigration to Mexico" out of Playa Del Carmen and Adriana said owning a car does not make you pay Mexican income tax.

Two more questions...if you don't mind.

1 - RRSP's - I think you mentioned these would attract Mex income tax? How do they know you withdrew if you don't own a house and don't have to file a Mexican tax return?

2 - If I only spend 2-4 months per year in Mexico after I receive my permanent residence and I rent a different place each year can I just give the immigration dept a post office box or do I have to change it every year or every time I rent a different place?
Thanks
-@Blackwatch
Hi Blackwatch,
First, if you spend only 2-4 months a year in Mexico then you will never be considered a non-resident of Canada thus you will be taxed as a regular Canadian citizen.
Second, even if you have the permanent resident status in Mexico, importing permanently a foreign vehicle is expensive even if 10 year old and labour intensive based on friends a lot of foreigners prefer buying a vehicle directly in Mexico
(IVA + DUTY FEES and need the RFC number)
https://www.gob.mx/tramites/ficha/permi … ados/SE662
https://www.comercioyaduanas.com.mx/com … os-mexico/
Third, spending only 2-4 months in Mexico a year, you would then not be considered a fiscal resident for SAT Mexico since you wouldn't be doing business in Mexico or living full-time.
Fourth, RRSP nor RRIF are not taxed differently if you are a non-resident fiscally for Canada but your provider might deduct a 25 % instead of the maximum 15% based on the tax treaty thus a refund from Revenue Canada Agency when filing your tax return.
Fifth, the INM requires a physical address for all foreigners and changes have to be done within 45 days of the change. https://www.gob.mx/tramites/ficha/notif … tes/INM829

On my part I have only one question:

1- what is your benefit for yourself to looking for permanent resident status in Mexico if your intention is not to live permanently in Mexico?

Buenos dias a todos, GyC.
-@mexicogc

Hi, thanks for the great info.

Does Mexico tax RRSPs if you are a PR and are renting?

As for the permanent residency in Mexico and only staying part of the year... I plan to travel a lot and would like to find the best country as a home base for tax purposes.

There does not appear to be an edit option...

Obviously I would establish PR status in Mexico and be deemed a non-resident of Canada by CRA before I started to travel outside of Mexico so much. I can't imagine CRA will try to track my movements in and out of Mexico 2-3 years later. I'm not sure what the Mexican tax dept would do if I told them I was living less than 50% of the year in Mexico?

Ok, the RRSP are taxed within the tax treaty as pensions so maximum 15% withheld in Canada (spouse and I have annual withdrawal from our RRIF). Globally, no income in Mexico = no taxes in Mexico.

For RCA, they don't track your travelling nor Mexico but you should talk to RCA because they taxe you income on the treaty for the country you established your residency in your case not 6 months which I think is a criteria but not sure.

The INM law and regulations allow the permanent resident to leave and return to Mexico as they please (article 54 if I recall correctly). For your residency address in Mexico this could be a concern but I would personally call the INM services and explain my situation to get a good answer. When I did asked questions previously on the subject for a friend they told me that each situation is different (the person wanted to leave and travel for 2 years outside Mexico).

Personally, I also have a PO BOX in Mexico so that my mail is sent there because the postal service doesn't deliver door to door in my area but to get a PO BOX you need your residency and physical address (catch 22).

One thing happened this year, the CPP/RRQ requested that we provide a notarized document to prove that we are still alive...this will be required every 2 years and the same could be in effect shortly for OAS.

Adios y buen dia a todos, GyC.

@mexicogc Interresting conversation, RCA rule is on top of residential ties are: 1 You live outside Canada throughout the tax year

2-You stay in Canada for less than 183 days in the tax year.

When you establish permanent residence status in Mexico there is no minimum stay requirements once you get your permanent residence status.

Canadian governement track your in and out of Canada via your passeport number, but once you are out of Canada they have no idea how much time you spend in each country untill you declare it when and if you return to Canada.

@mexicogc Interresting conversation, RCA rule is on top of residential ties are: 1 You live outside Canada throughout the tax year
2-You stay in Canada for less than 183 days in the tax year.
When you establish permanent residence status in Mexico there is no minimum stay requirements once you get your permanent residence status.
Canadian governement track your in and out of Canada via your passeport number, but once you are out of Canada they have no idea how much time you spend in each country untill you declare it when and if you return to Canada.
-@Captnflex

This is what I understand regarding PR status in Mexico and remaining a non-resident of Canada by CRA. I don't know of any direct tracking CRA does with passports and merging that info up with the few non-resident tax people. CBSA tracks traveler history at land borders and airports but if you enter by marine mode 99% of your entries are not tracked in this system. Mainly cruise ships and small vessels like sailboats. I believe CRA needs to have a reason to start looking into an individual based on someone reporting them.

Ok, the RRSP are taxed within the tax treaty as pensions so maximum 15% withheld in Canada (spouse and I have annual withdrawal from our RRIF). Globally, no income in Mexico = no taxes in Mexico.
For RCA, they don't track your travelling nor Mexico but you should talk to RCA because they taxe you income on the treaty for the country you established your residency in your case not 6 months which I think is a criteria but not sure.
The INM law and regulations allow the permanent resident to leave and return to Mexico as they please (article 54 if I recall correctly). For your residency address in Mexico this could be a concern but I would personally call the INM services and explain my situation to get a good answer. When I did asked questions previously on the subject for a friend they told me that each situation is different (the person wanted to leave and travel for 2 years outside Mexico).
Personally, I also have a PO BOX in Mexico so that my mail is sent there because the postal service doesn't deliver door to door in my area but to get a PO BOX you need your residency and physical address (catch 22).
One thing happened this year, the CPP/RRQ requested that we provide a notarized document to prove that we are still alive...this will be required every 2 years and the same could be in effect shortly for OAS.
Adios y buen dia a todos, GyC.
-@mexicogc

Very interesting. I always wondered if I died in Panama how long my pensions would continue.

Did anyone explain the reasoning as to why owning a home in Mexico makes you pay Mex income tax?

I wonder if one of my kids bought a vacation home in Mexico, I rented from them and when I wasn't in the country it was a rental property for tourists if that would be fine.  Obviously paying tax to the Mex govt on the rental income.

Hi Blackwatch, never said that owning a property in Mexico makes you pay taxes...no...but owning a property requires you to be registered with the SAT through the RFC number that is required for a purchase contract and the notary documents. You would then be subject to pay capital gain once you sell it ALSO very important you are required to report the sale to RCA if you are still considered as a fiscal resident for Canada thus as a secondary property and deduct the taxes already paid to SAT Mexico but a lot of persons don't  (a person that I know personally told it two years after the sale to his accountant...the accountant was quite direct to his client of many that it's illegal not to report...especially that the accountant was the one signing the tax returns...).

For the property rental revenues, they are all taxable but far SAT/RFC and subject to the IVA taxes plus an additional taxe since furnished. Applies also too any AIRBNB rental (you could check directly in AIRBNB for property owned by Mexicans these taxes are added to the rates). These revenues are also too be reported in your Canada tax return and the foreign taxes paid reduced on the return BUT lots of foreigners don't comply and have foreigners renting. In Mexico, the rentals charges are always and mandatory by law to be shown and entered on the receipt in mexican pesos. This is one reason I am renting from a mexican and paying in pesos.

Adios y buen dia a todos, GyC.

@mexicogc thank you. I misunderstood you. I read a few of your older posts and seem to understand now.

Canadian Non tax resident : Canadian based pensions and RRSPs you pay 15% tax at source. Mexico does not tax you on these two sources of income because they are covered in the tax treaty. If you buy a house you must complete a tax return in Mexico but you still won't pay income tax. When you sell the house you pay capital gains in Mexico.

For some reason I was thinking that as soon as you owned property or had a Mexican bank account you would then have to pay Mexican income tax on all of your income including Canadian pensions.

Thanks again for taking the time to explain this. I will definitely buy a house and most likely stay longer in Mexico each year. Jan, Feb Mar though will most likely be in Costa Rica. If I could do 15% income tax total in CR that's where I would be but it's 25% there plus the healthcare deductions are almost 20% of your income!

Hey Blackwatch /  Mexicogc, If you are a non-resident of Canada and rent a place in Mexico - make no money in Mexico - where do you put your investment money??? If you are a resident of Mexico, you pay tax there on your worldwide income I think. This not the case in Costa Rica- money made outside of CR is not taxed - where do you put your investment money if residing in Costa rica?

@mrpres It depends on each individual case. I'm not an expert by any means. If I sold a company I would look for a country like Bermuda or Cayman Islands that are tax havens, choose the lowest fee and move my money there. I believe once you become a non-resident for tax purposes you don't pay tax on this money in Canada.

My retirement will be funded by Canadian sourced pensions and RRSP's which should not be taxed in Mexico. Just 15% in Canada.

The departure tax does not apply to a lot of investment vehicles in Canada like RRSPs and TFSAs.

I would look at Panama if I had a few million from selling a business or something similar. Costa Rica has what's called the Caja (public healthcare and national pension) I'm sure there are ways around it but you can get caught not reporting your entire income to the Costa Rican govt. If you make $3000 USD or more as a pensionado you pay almost 19% to the Caja. I would pay about $1400/month Canadian.  There will be more people becoming perpetual tourists, even if they own a home in CR and just driving to Panama or Nicaragua every 3 months to reset their imm status.

@Mexicogc

I believe if you buy a home in Mexico as a permanent resident, rent it out when you are gone that you only pay income tax on the profit from the weeks rented. Your Canadian pension and RRSPs would still only be taxed 15% by Canada and protected by tax treaty from the Mexican income tax dept.

One explanation in another thread says something a little different though. They said you still pay Mexican income tax on your Canadian pension. You submit a Mexican tax return and if you owe 30% in taxes in Mexico they credit you with the 15% you paid in Canada and you owe another 15% to the Mexican govt. The tax treaty only protects you if you pay 15% or less in Mexico if that makes sense?

Hi to all, in the previous posts, we were talking about Costa Rica and Panama, in those instances there are no fiscal agreement between Canada and those countries so any non-resident of Canada living there would be taxes at a 25% rate non all in Canadian incomes from all sources and no sure if he couldn't apply for article 217.

@Blackwatch, for the rental revenues, true only the real revenues would be taxed in Mexico then reported in the Canadian tax return if you apply for article 217 as a non-resident of Canada.

Once again, a situation is always possible to change, the above reply is different if you are buying the property in Mexico but still considered a fiscal resident for Canada.

So the best is to simulate the situation you are looking for...get ready a do a simulation of tax return. I did that the year or two before leaving and requesting the permanent resident status for Mexico. Still beneficial, I still do a simulation annually if I was living in Quebec.

Adios y buen dia a todos, GyC.

@mexicogc Yes, I have done several simulated tax returns based on different provinces of residence and countries. I heard back from a couple of tax accountants in Mexico and they both confirmed Canadian pensions are not taxed in Mexico. There is so much misinformation out there. I read an article on money sense.ca that said Canadian pensions were taxed after they exceed 9 times the minimum wage in the Mexican state you reside in.

I have been to Mexico many times and always planned to move there in retirement but after a couple of weeks in Santa Teresa Costa Rica I was having a lot of doubts. Costa Rica has a lot of hidden costs aside from the 25% income tax Canada takes. I will most likely rent down there in the driest months. That was the warmest water we had experienced aside from Bali.

Thanks again for all of the information:)

my RRIF is taxed at 25% not the one approved by RCA even if I wrote to them (RCA will advise the following: employer pension, CPP, OAS, RRQ only not RRIF/RRSP)

Hi Mexicog,

I noticed you said in this post Revenue Canada taxes RRSPs at 25% but in a later post you said 15%. Can you elaborate? Thanks, when I spoke with Revenue Canada I thought they said my RRSP would be taxed at 15% as a Mex resident.

Thanks

@mexicogc thank you. I misunderstood you. I read a few of your older posts and seem to understand now.
Canadian Non tax resident : Canadian based pensions and RRSPs you pay 15% tax at source. Mexico does not tax you on these two sources of income because they are covered in the tax treaty. If you buy a house you must complete a tax return in Mexico but you still won't pay income tax. When you sell the house you pay capital gains in Mexico.
For some reason I was thinking that as soon as you owned property or had a Mexican bank account you would then have to pay Mexican income tax on all of your income including Canadian pensions.
Thanks again for taking the time to explain this. I will definitely buy a house and most likely stay longer in Mexico each year. Jan, Feb Mar though will most likely be in Costa Rica. If I could do 15% income tax total in CR that's where I would be but it's 25% there plus the healthcare deductions are almost 20% of your income!
-@Blackwatch

I tried to multi quote but it didn't work. thanks.

I live in Mexico permanently and I only pay 15% tax. I was told, by Revenue Canada, that I should contact all my payees and have them withhold 15% and then I would not have to submit a tax return each year. I haven't bothered. I just submit a return. But, it has to be mailed in. I cannot ise any tax software to make an online submission.

Also you can apply all of your medical expenses to your tax return which can amount to a significant amount of money they will refund you.

@Mike Bluett 15% on RRSPs as well?

If you rent your home out you only pay Mex income tax on the profit of the rental? Just want to make sure the Mexican income tax dept doesn't use that to capture your Canadian sourced income.

Also you can apply all of your medical expenses to your tax return which can amount to a significant amount of money they will refund you.
-@MikeGB

Do you have medical coverage that you pay for? I will be a retired fed employee and my coverage I pay into will cover everything that my provincial health coverage would in Canada except stays in hospitals or visits to doctors who are employees of a hospital. Private clinics are covered.

Hard to find another retired Canadian fed employee on here living in Mexico.

Check this link

https://www.canada.ca/en/revenue-agency … nr301.html

if it does not work Google CRA+NR301 Declaration of eligibility for benefits (reduced tax) under a tax treaty for a non-resident person

If you are a permanent resident of Mexico, they withhold 15% of your Canadian registered accounts but if your income is low, you can file a Cdn tax return and get some money back. Most earn too much money for that option so it is better not to file Cdn tax returns.

Hi to all on the above comments from December 3rd,

First to Blackwatch: I am a retired federal government employee so is my wife

Second to Captnflex: the taxe reduction is related to article 217 of tax law but you have to file a manual tax return (I send them via courier FEDEX or DHL by June 30th but if you owe you must pay before April 30th)

Third to mrpres: if gross income is close to $50K = 12% net tax paid if close to $35K with medical costs = 5% net tax paid every situation should be calculated

Fourth to Blackwatch: the medical coverage from the employer of retired civil servants is worthless except until covered by IMSS in our case (IMSS 2022-2023 based on our age less then $16000 pesos each)

Fifth to Blackwatch and Mike Bluett: for RRIF payments to provider could withhold 25% but  you will get the refund via annual manual return (Article 217) or completing form NR7 for that RRIF supplier directly with RCA. In my case, my RRIF provider deduct 25% because the numerous tax treaties or inexistant treaty. https://www.canada.ca/en/revenue-agency … nr7-r.html

Like I said numerous times, each individual should make a dry run by completing the tax return based on Article 217 of the law and see if the results are worth the complexity.

Adios y buen dia a todos, GyC.

thanks - if I was a resident of Panama for example - where do I park my investment money. I was not a gov't employee - I have a lot of cash. Thanks for your comments

thanks - if I was a resident of Panama for example - where do I park my investment money. I was not a gov't employee - I have a lot of cash. Thanks for your comments
-@mrpres

HI mrpres, there is no fiscal agreement between Canada and Panama so...becoming a non resident of Canada and moving to Panama has major impacts on your investments.

I am not a specialist but I think all RRSP or RRIF will be considered withdrawn and added to your final Canadian tax return all future income from Canada will be taxed at 25% and not allowed to produce a manual tax return based on article 217.

But since I am not a specialist, I suggest you contact the Revenue Canada international services or a international tax accountant specialist.

Adios y buen dia a todos, GyC.

i am pretty sure the RRIF's stay in Canada and there is a 25% withholding tax (this sounds high but if I am resident in Canada, I pay 50%+). My concern is where do I park my investment money. Mexico taxes you on your worldwide income so I am not going there (no tax savings). Costa Rica and Panama don't tax you on money made outside the country so they are appealing.