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How are Mexican corporations taxed on property in the US?
How are Mexcian corporations taxed on real estate in the US? What limitations, laws, or restrictions should a Mexican corporation know about owning property in the US?
Asked By Javier | Pueblo, NM | 303 views | Investing | Created 7 months ago
Answer(3)
Amanda Courtney
REP Realty Group
A Mexican corporation that owns U.S. real estate is subject to U.S. taxes just like any foreign entity. That includes income tax on rental income and potential capital gains tax when selling. It’s crucial to consult a cross-border CPA familiar with the U.S.–Mexico tax treaty to avoid double taxation.
- 3 weeks ago
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Jason Craig
Coldwell Banker
When a Mexican corporation owns real estate in the United States, it is generally treated like any other non‑resident foreign corporation for tax purposes. Here are some key points to consider:
• **Income tax on rental income:** If the corporation rents the property, rental income is subject to U.S. income tax. A foreign corporation can elect to be taxed on the net income (gross rents minus allowable expenses such as mortgage interest, property taxes, maintenance, and depreciation). Without this election, the IRS may tax the gross receipts at a flat 30% rate (or lower if a tax treaty applies). The corporation must file an annual U.S. tax return, typically Form 1120‑F, to report income and expenses.
• **FIRPTA withholding on sale:** Under the Foreign Investment in Real Property Tax Act (FIRPTA), a buyer must generally withhold tax when a foreign owner sells U.S. real estate. The standard withholding rate is 15% of the gross sales price, not the gain. This withholding is credited against the seller’s actual tax liability, and the seller can apply for a reduced withholding certificate if the expected tax is lower.
• **State and local taxes:** States and municipalities may impose their own income, property, and transfer taxes. Some states require additional withholding when a non‑resident sells property. The rules vary by location, so it’s important to understand the specific obligations in the state where the property is located.
• **Corporate formalities:** A foreign corporation that owns property or conducts business in a U.S. state may need to register as a foreign entity and comply with annual reporting and fee requirements. Certain structures (such as using a U.S. LLC owned by the foreign corporation) may offer liability or tax advantages.
Because cross‑border tax rules are complex and highly dependent on individual circumstances, it’s wise to consult a tax attorney or certified public accountant with experience in U.S.‑Mexico tax matters. They can help ensure compliance with federal and state tax laws, advise on the most tax‑efficient ownership structure, and assist with FIRPTA withholding and treaty provisions.
• **Income tax on rental income:** If the corporation rents the property, rental income is subject to U.S. income tax. A foreign corporation can elect to be taxed on the net income (gross rents minus allowable expenses such as mortgage interest, property taxes, maintenance, and depreciation). Without this election, the IRS may tax the gross receipts at a flat 30% rate (or lower if a tax treaty applies). The corporation must file an annual U.S. tax return, typically Form 1120‑F, to report income and expenses.
• **FIRPTA withholding on sale:** Under the Foreign Investment in Real Property Tax Act (FIRPTA), a buyer must generally withhold tax when a foreign owner sells U.S. real estate. The standard withholding rate is 15% of the gross sales price, not the gain. This withholding is credited against the seller’s actual tax liability, and the seller can apply for a reduced withholding certificate if the expected tax is lower.
• **State and local taxes:** States and municipalities may impose their own income, property, and transfer taxes. Some states require additional withholding when a non‑resident sells property. The rules vary by location, so it’s important to understand the specific obligations in the state where the property is located.
• **Corporate formalities:** A foreign corporation that owns property or conducts business in a U.S. state may need to register as a foreign entity and comply with annual reporting and fee requirements. Certain structures (such as using a U.S. LLC owned by the foreign corporation) may offer liability or tax advantages.
Because cross‑border tax rules are complex and highly dependent on individual circumstances, it’s wise to consult a tax attorney or certified public accountant with experience in U.S.‑Mexico tax matters. They can help ensure compliance with federal and state tax laws, advise on the most tax‑efficient ownership structure, and assist with FIRPTA withholding and treaty provisions.
- 1 month ago
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Chris Cervantes
RE/MAX GOLD
Mexican corporations are taxed on U.S. real estate income, including rental income and capital gains. Key points to know:
Income Tax: U.S. taxes apply to rental income and profits from selling property.
Withholding Tax: When selling, there’s a 15% withholding tax on the sale under FIRPTA.
State Taxes: They may also owe state and local taxes.
A tax professional is essential to navigate these rules.
Income Tax: U.S. taxes apply to rental income and profits from selling property.
Withholding Tax: When selling, there’s a 15% withholding tax on the sale under FIRPTA.
State Taxes: They may also owe state and local taxes.
A tax professional is essential to navigate these rules.
- 7 months ago
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