Personal Taxation, Mexico

It would seem that you might just want to open a personal account with whatever the minimum deposit amount is and have it as a 2nd option.

I've always been told "cash is king" in Mexico, and it seems to be true. Lots of people are paid in cash, and expect payments to be in cash.

You can make deposits to any bank at the counter, so if someone wants you to occasionally deposit funds into their account, you can go to their bank and (wait in line to) make that deposit. Even if you get an account, the interbank transfer fees make it more practical to do the counter deposit anyway, if its a different bank than yours. Online services are VERY limit here so dont count on that to simplify things.

As for the tax man, just keep track of all taxable returns or expenses so when they audit you (and they will at some point) you can flood them with whatever papers (in triplicate) that they request. I think the law is 5 years or records, but I'm not positive on that.

 

We started with Banamex when we first moved here based on the (false) assumption that since they were part of Citigroup affairs between our US Citibank accounts and our Banamex account would be transparent. When Banamex temporarily "lost" a 14 thousand dollar wire transfer the tangle of lies, misstatements, prevarications and pure BS we endured, plus the 380 dollars we lost on the exchange rate 45 days later when the money was returned to Citibank broke that connection.

Banamex continued to send us monthly service charges on our zero balance account for over a year until I went down to the central branch on Tulum and made enough ugly-American noise to get them to close the account and forgo the service charges.

Based on a personal relationship that developed down here, we had opened an account at Scotiabank, where our friend was the manager of the La Isla branch. Even though she left Cancun shortly after, the banking relationship has been a fairly smooth one, with few hiccups and rock steady reliability. The paperwork is still ridiculous, but that's Mexico. We recently migrated one account into another. Since I'd been through it before, this time I decided to count signatures and initials. Thirty-six pen scratches later the job was done.

Scotia's online services are good, although you need working Spanish to navigate your way. But things like direct deposits, transfers between accounts, balance retrievals, etc are effortless. Ordering a new checkbook, however, still involves everything just short of a DNA test. You complete that when you go down to the branch to pick up the checks. :icon_biggrin:

 

My limited experience is that if an employer in Mexico is going to insist on paying you via a direct deposit then they will also insist that you use a bank of their choice. The govt does this and even opens said accounts for all govt employees. So if you get into this situation you may not have any choice of which bank you use.

If you get paid via check then you can always go wait in a mile-long line to cash that check.

Do make sure you understand the tax issues that Life mentioned regarding amounts over a certain level in bank accounts. Mexico is trying to collect more taxes and is enlisting banks to help them by automatically taxing the money people put in their accounts.

 

In my experience as an employee, you have to have an account with the bank that the employer uses. My old employer was with Bancomer, thus, I had to have a Bancomer account whether I liked it or not. Now with the job change, I had to get a Banorte account. Of course, my new employer is changing to Bancomer next month, but they don't think they can use my existing account, I might have to get a new one. And I will have a Banorte account that I used exactly once. Hubby has changed jobs a few times since we've been in Cancun and has been forced to change banks every time. I really don't like not having a choice, but hey, ni modo as they say, at least I am getting paid! Crazy if you ask me.

 

Well, I've had a lot more experience with the tax man, since the last postings to this thread. It turns out my university opened a bank account for me, as predicted by several of you, most recently CancunCanuck, and presented me with my first Mexican Bank Card. The pay goes into that account net of taxes. If the university job was all I was doing, the thing would be extremely simple, as it's been explained to me- no declarations and no trips to the tax office, with the university calculating, and paying from my wages, all taxes due. However, because I also plan to work independently, offering my professional services, I have to follow a different tax regime which requires monthly declarations.

When the first declaration came due, I went to the tax office without an appointment and was given a number. A few minutes later I was called to one of about 15 agents, who then proceeded to explain the process to me, and help me complete my first monthly declaration. He also showed me how to properly fill out the receipts I'd had printed in anticipation of someone actually paying me. He said I could come back for help again next month, if I wanted.

He then registered me for online access for filing the declarations, so once I learn how to do it, I can do it from home. This process comes with an electronic signature.

The next day I attended an orientation for new taxpayers where they went over the requirements and answered questions to a group of about 15 of us. What we had in common was that we were either "impresarios" or "professionales". Both, it seems, observe a similar tax regime. It was in Spanish, so I may do a repeat next month, just to see if I can catch more of what's said. In general, the way taxes are calculated for individuals seems to be much as it is in the U.S., with tax tables, etc.

The people I dealt with were uniformly polite and patient with both my Spanish, and my lack of familiarity with the process.

I'm determined to try to do everything myself, never having liked to deal with accountants who, so far as I'm concerned, just represent one more link which can fail in the process of completing my tax returns. When I do them, I know who's responsible, and get them in on time: with the tax office's help, I know they'll be in the order they want, as well.

It's too early to say with confidence how big a bite will be taken out of the net after expenses but, so far, it doesn't look bad: there is a requirement on self-employment earnings to withhold 10% as a deposit against the total taxes for the year. I'll also be collecting IVA, but this is just a sum that is partially forwarded to the government each month, and self-employed people can apply the IVA you pay when you purchase goods and services against the sums you're supposed to forward along. (The tax office has confirmed that detail to me, something I first heard from another self-employed expat, here.) I'll have a chance to see how it works in practice, with the next declaration, due next month.

 

Do it yourself

For anyone who is trying to work independently, as I do, I've had a few more contacts and experiences with the tax man to share with you, since the last post. Hopefully, this will be useful to know, if anyone is thinking of coming to Cancun with the intention of offering personal services for profit.

It turns out that the process of doing my taxes myself is not difficult but, sadly, I can't do the monthly declarations online, as I originally thought I could; instead, I have to make an appointment, online, and go to the tax office each month, where 1) they prepare my declaration for me (a routine service offered by the Mexican tax authorities: many people take advantage of this, and save what they would otherwise have to pay an accountant), and 2) calculate how much tax is due for that month.

Since I have self-employment income, I have to pay a flat rate, minimum tax of just over 17% of my net income in income taxes: this tax is called IETU, as I recall.

IVA ("VAT", similar to a sales tax), which I collect from my clients, is just passed through to the tax authorities, and doesn't cost me anything.

If you have business expenses you are not allowed to claim them unless you got a "factura" from the provider, which is a very formal statement of the business expense incurred. Normally easy to get, some providers make you do a little dance, asking you to come just after the end of the month to collect a single factura for all the expenses you incurred with them during the month.
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Here's something I don't quite get, and some of you who've been in business here may understand this more deeply than I do (that would be easy): some providers seem to give me an informal receipt; then, when I ask for a factura, they demand I pay IVA, which they include in the factura. What seems odd to me about this is, why didn't they charge me IVA, upfront? Isn't it supposed to be charged on all transactions subject to IVA?

Steve, others, with experience here, what can you tell me about what's actually going on with this? It just seems odd, that they wouldn't collect it, upfront, since it's passed through to the government, and doesn't cost them anything to collect....