Forums > General > Living, Working, Retiring

margojean

Nov 10, 2009, 12:19 PM

Post #1 of 22 (7540 views)

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Income tax

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We are Canadians who became non-resident in Canada for tax purposes, when we lived in the USA for a while. Now we are retired here in Mexico permanently with FM3s, and wish to become non-residents of the US for tax purposes. But we should file a return somewhere, shouldn't we? Our income is only Canadian CPP and registered retirement funds.

How difficult would it be for us to file a Mexican tax return? Would we need a tax advisor? Is it simple, or something to be avoided at all costs, or somewhere between?

Do we need to file in Mexico in order to qualify for the 15% withholding tax on these revenue sources under the Canada-Mexico tax treaty? Does anyone check, here or in Canada, to see if we are filing here?

Zorba

Nov 11, 2009, 12:54 AM

Post #2 of 22 (7468 views)

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Re: [margojean] Income tax

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I am assuming you are Canadian and do not have American citizenship?

What income will you have coming in and from where ? The U.S.? Mexico? Canada?

margojean

Nov 11, 2009, 5:24 AM

Post #3 of 22 (7455 views)

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Re: [Zorba] Income tax

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Canadian citizens, Canadian income, deposited in our Canadian bank account.
margojean

Zorba

Nov 11, 2009, 5:56 AM

Post #4 of 22 (7446 views)

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Re: [margojean] Income tax

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I see. Well, you need not worry about the U.S. then because they only tax foreign income based on citizenship. So, they have no right to tax you since you are not a U.S. citizen and you are no longer even living in the U.S.

One down.

Since your income is generated in Canada, Mexico also has no right to tax you on that money. Mexico could only tax you on whatever you earned within Mexico, which is nada, zero, zip.

Two down.

I am not retired so I have no pension income. I am assuming this is the type of income you have in Canada. So, there is probably somebody else who can help you with that. Your situation sounds pretty simple and rather ideal to me. You will only be taxed on your pension income by Canada. I am a non-resident myself and I know there is a flat 25% tax rate for any income I generate in Canada.

Are you saying the tax rate for your pension is only 15% under a tax agreement with Mexico?

Personally, if I were you I would try to work it out so you didnt have to file any taxes. Its a pain in the ass. Perhaps you could receive your pension income with the tax being automatically deducted? Then you wouldnt have to file. You would just have to make sure you had all your documentation in order in case of the unlikely event (an audit). You would then simply have to show the documentation that proves you had paid your tax on your pension. Case closed.

I dont file any tax forms as a non-resident. If the Canadian government ever required me to upon my return I have archived all my documents that prove I am a non-resident of Canada and, therefore, not subject to tax on my foreign income.

If the tax on your pension is less as a non-resdent of Canada...make sure you ARE a non-resident. That means cutting all your ties to Canada. The best advice I got was "Leave like you aren't coming back". Too many people claim non-residency but keep ties to Canada (drivers license, credit card, vehicle, storage items, etc). When you do this you leave yourself open to the possibility of the government claiming you never truly were a non-resident (too many ties) and, therefore, owe them backtaxes. I know a friend who was working in Hong Kong without having set foot in Canada for that time, who had to pay 3 years of backtaxes to Canada simply because she kept her driver's license. And dont think that just because you get "the letter" from the government saying they deem you non-resident means you are free and clear. That letter is non-binding (it even says so). They can change their mind if they later find out you had too many ties. Non-residency is a grey area and they like to keep it that way, so they can abuse you.

Personally, the only tie I have left is my passport.

margojean

Nov 11, 2009, 6:24 AM

Post #5 of 22 (7427 views)

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Re: [Zorba] Income tax

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Canada-Mexico Tax treaty Article 18 section 2:

2. Pensions arising in a Contracting State and paid to a resident of the other

Contracting State may also be taxed in the State in which they arise, and according

to the law of that State. However, in the case of periodic pension payments, the tax

so charged shall not exceed the lesser of

(a) 15% of the gross amount of the payment; and

(b) the rate determined by reference to the amount of tax that the recipient of

the payment would otherwise be required to pay for the year on the total amount of

the periodic pension payments received by that individual in the year, if that individual were a resident of the Contracting State in which the payment arises.

You said: Well, you need not worry about the U.S. then because they only tax foreign income based on citizenship. So, they have no right to tax you since you are not a U.S. citizen and you are no longer even living in the U.S.

But once you live in the US as a resident alien and file tax returns there, getting off the IRS tax rolls is not easy, even when you leave. There is an expat form that can be filed and renewed annually, and they still tax you on any US investments generating dividends (but only when you sell, I think) anywhere in the world - e.g. US equities in our Canadian retirement fund. Interest income is exempt. And when you die, for expats there is estate tax on US holdings anywhere over US$60,000.

margojean

Riverman

Nov 11, 2009, 8:17 AM

Post #6 of 22 (7394 views)

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Re: [margojean] Income tax

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I looked into this also and the thing that strikes me in your case is this;

a Canadian driver's licence;
Canadian bank accounts or credit cards;
health insurance with a Canadian province or territory.

Are all things you have to give up to qualify as a non-resident.

try copy and pasting the following.

http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html

Good Luck. John

Zorba

Nov 11, 2009, 8:20 AM

Post #7 of 22 (7393 views)

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Re: [margojean] Income tax

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Hmmm. Sounds like you know your stuff. That whole paragraph is lawyer speak to me. I hate the way they write
that shit. Sounds like you might need a tax lawyer to be sure about things. I'll probably just confuse things by
commenting at this point. Would love to hear the solution though.

I have heard good things about these guys if you dont get your answer here:

http://www.expat.ca/

(This post was edited by Zorba on Nov 11, 2009, 8:27 AM)

Zorba

Nov 11, 2009, 8:25 AM

Post #8 of 22 (7389 views)

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Re: [Riverman] Income tax

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I have a Canadian bank account, but I personally changed its status to a "non-resident" account which
means 25% of any interest is already deducted (capital gains) by the bank as tax. That way I do not have
to file an income tax form every year just for the interest on my balance. Something to think about.

Georgia

Nov 18, 2009, 6:53 AM

Post #9 of 22 (7144 views)

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Re: [margojean] Income tax- just a little tweak re: FM-3

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Please keep in mind that an FM-3 is simply and multiple entry tourist visa, not a residency visa, that is an FM-2. So, you really are just a tourist in Mexico, for whatever difference that makes to whatever taxing entity.

La Isla

Nov 18, 2009, 8:50 AM

Post #10 of 22 (7103 views)

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Re: [Georgia] Income tax- just a little tweak re: FM-3

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I find this statement a bit strange. My FM3 is not a variety of tourist visa since it gives me permission to work in Mexico and also allows me to open a bank account, get senior citizen benefits through INAPAM and other perks not granted to tourists. An FM3 classifies me as a non-immigrant not a tourist.

richmx2

Nov 18, 2009, 8:38 PM

Post #11 of 22 (7025 views)

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Re: [Georgia] Income tax- just a little tweak re: FM-3

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FM-3 a "tourist visa"????... not hardly. If it has an equivalent in the United States, it's a "green card" (or, in my case, perhaps that's "gringo card")...

http://voiceofmexico.com

Papirex

Nov 18, 2009, 9:53 PM

Post #12 of 22 (7016 views)

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Re: [richmx2] Income tax- just a little tweak re: FM-3

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A permanent residency card is a “green card”and they are not a visa. They are much harder to get than any Mexican visa. My wife has a green card, to get it for her in The US many years ago, besides our marriage certificate, I had to produce a letter from my employer stating the length of time I had been employed, and that my employment was permanent. I also had to go to my bank and get complete records of my banking history to give to US immigration for the previous three years.

A green card is permanent with no expiration date provided some conditions are always met. Two of the most important conditions are: #1 A permanent US residency address must be maintained. #2 A US federal income tax form must be filed every year even if no taxes are due.

We do maintain a US residency address, and we file joint income taxes electronically every year. Since we meet the two key requirements, my wifes' green card remains valid. A green card also has a magnetic information strip on the back of it. Rarely, it will be passed through a scanner at the US border. It will reveal all pertinent personal information including the permanent US address, I don't know if it lists your dogs blood type. But if the wrong person is using it, they probably won't know the US residency address, or the true holders birth date, etc.

Rex

"The supreme happiness of life is the conviction that we are loved" - Victor Hugo

jerezano

Nov 19, 2009, 7:44 AM

Post #13 of 22 (6956 views)

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Re: [Papirex] Income tax- just a little tweak re: FM-3

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Hello all,

Somebody here said that the FM3 is equivalent to a "green card" for foreigners in the USA.

NOT SO!

The FM3 is a temporary visa to reside in Mexico for one year living on the income from what is authorized by the Immigration Department. That is, on a pension or other fixed income, or from authorized work, etc. But it is temporary with the provision that it may be renewed under certain conditions for 4 years and then must be replaced with a new one.
I have lived here in Mexico on an FM3 for almost 15 of the 20 years I have been here. The FM3 clearly states the income basis on which it is issued.

A "green card" (I have heard they are no longer green but peach in color, although I have never seen anything but green) gives the right to a foreigner in the USA to reside permanently in the USA and with no restrictions on working etc. Somebody here has also mentioned the requirements which must be met to retain a green card. He was correct although I had never heard about a requirement for filing an income tax return with the IRS. In fact I have several friends with green cards and none of them file income tax returns.

An FM2 which grants the foreigner here in Mexico the right to permanent residence is more equivalent to the "green card" than is the FM3.

The previous poster who said that the FM3 holder is NOT considered a permanent resident in Mexico for tax purposes by either his/her home country or by Mexico is for the previous reason (non-resident) correct. Only income generated in Mexico is taxed by Mexico. Unfortunately my home country the USA taxes all income whether foreign or USA generated unless covered by a special agreement with that particular foreign entity and for Mexico there is none.

Correct me if I am wrong. I seem to be going in the wrong direction so many times lately. Age?

As ever, jerezano.

morgaine7

Nov 19, 2009, 9:03 AM

Post #14 of 22 (6932 views)

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Re: [jerezano] Income tax- just a little tweak re: FM-3

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My understanding is that inmigrado status is closest to a green card in the US. Before reaching that stage, the FM2 has to be renewed each year with proof of income, etc., and does not automatically grant work privileges. One has to apply for them.

I have an FM2 now, but even as an FM3 holder, I declared my residence as Mexico to the IRS because it was (is) my full-time and only residence.

Kate

Papirex

Nov 19, 2009, 9:12 AM

Post #15 of 22 (6929 views)

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Re: [jerezano] Income tax- just a little tweak re: FM-3

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This is a link to a private law firm which gives a lot of information about preserving a green card so it is not canceled. http://www.visalaw.com/01jan4/12jan401.html While it is not a US Government site, the information seems credible to me. There is a myth that returning to The US once a year will preserve a persons green card status. My wife believed that story and she was worried until I found this site which tells how to legally preserve a persons green card status to keep it legal.

This site also gives some advice about what documents it is wise to carry when traveling to The US in the unlikely event that a person is questioned about their green card status at the border. My wife does have three US issued credit cards in her own name, and three in my name that she is secondary on. She always carries a couple of copies of our latest bank statements and our latest filed US income tax forms also. She has only had her green card scanned once, but it shows everything about her, and she is now well prepared if it ever happens again when traveling NOB.

The original green cards were issued under the old, now terminated Bracero program which was created during, or shortly after WWII to allow Mexican farm workers to enter and work in the US. My suegra used to have one of them. I have seen one of them, and those cards were about the same shade of green as the original American Express cards and they had a photograph of the card holder on the front of them. They are no longer valid.

There is only one restriction on working in The US for a green card holder, they may not work for The US government, only US citizens may do that.

My wifes' “green card” is actually white with a wide blue stripe across the face of it, she has had it for many years, possibly the color has been changed again in recent years.

Rex

"The supreme happiness of life is the conviction that we are loved" - Victor Hugo

Georgia

Nov 19, 2009, 10:05 AM

Post #16 of 22 (6915 views)

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Re: [La Isla] Income tax- just a little tweak re: FM-3

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In Spanish the word applied to the FM-3 on the government website is: "visitante" -- it is like a US multiple entry tourist visa in the US, with the exception that you can make a separate application to work under certain circumstances. It is not equivalent to a residency visa. It is permission to stay here or come and go for one year only. It is renewable.

jerezano

Nov 19, 2009, 10:19 AM

Post #17 of 22 (6911 views)

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Re: [Papirex] Income tax- just a little tweak re: FM-3

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Hello all,

Papirex has made some good points about the green card which is wandering a bit away from the thread of this discussion. But to wander just a bit farther......

Quote: >>>>There is a myth that returning to The US once a year will preserve a persons green card status<<<<

To my understanding a green card holder who is absent from the USA for more than 6 months stands the possibility of losing that card to the Immigration authorities. Isn't that correct? Apparently Papirex, whose wife is a green card holder, has found a work around for that problem. A friend, who holds a green card but is now living with his family here in Mexico, is careful to return to Texas with me within that six month period. He also acquired a Texas driver's license (his residence in the USA is in California) and when we cross the frontier he always shows both the green card and the Texas driver's license. Just to be on the safe side he also asks that the bill and receipt for the Motel on the Texas side be listed in his name. He then takes that receipt back to Mexico with him. So far he has never encountered a problem. Nor has he ever had to show the Motel receipt. His green card has been scanned several times. Of course he knows more about the requirements of a green card than I do. Nor does he file an income tax return with the IRS.

Quote:>>>>>>>>>>>>>>>>>The original green cards were issued under the old, now terminated Bracero program which was created during, or shortly after WWII to allow Mexican farm workers to enter and work in the US. My suegra used to have one of them. I have seen one of them, and those cards were about the same shade of green as the original American Express cards and they had a photograph of the card holder on the front of them. They are no longer valid.<<<<<<<<<<<<

My friend's green card is still green, it looks much like an American Express card. and I think it does have a picture of him on the front. I will have to look next time. But, it is STILL VALID.

Now returning to the original thread, the FM2 even though it does not grant inmigrado status does grant residence. The FM3 on the other hand only grants permission to stay (visit--visitante) in Mexico for one year. In other words the FM3 is more like a tourist permit which is for a whole year rather than 180 days. True it also grants other goodies not available to the normal tourist. Also true is the FM3 can no longer, as in the past, be converted to inmigrado status. It can, however, be converted to an FM2 after five years.

As ever, jerezano.

(This post was edited by jerezano on Nov 19, 2009, 10:32 AM)

La Isla

Nov 19, 2009, 11:18 AM

Post #18 of 22 (6895 views)

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Re: [Georgia] Income tax- just a little tweak re: FM-3

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The government website may say that the holder of an FM3 is a "visitante", but the FM3 itself says that I used to be a "turista" but now am here "en calidad de no inmigrante".

jerezano

Nov 19, 2009, 12:34 PM

Post #19 of 22 (6877 views)

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Re: [La Isla] Income tax- just a little tweak re: FM-3

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Hello,

Quote:>>>The government website may say that the holder of an FM3 is a "visitante", but the FM3 itself says that I used to be a "turista" but now am here "en calidad de no inmigrante".<<<<

I am now looking at my FM3. It states on page 4 that "Este documento facilita a su titular a permanecer en el país , en calidad de No Inmigrante por 365 días, como No Inmigrante Vivitante Rentista en acuerdo de.....etc."

That translates as: This document allows the holder to remain in the country, as a Non Immigrant for 365 days, as a Non Immigrant "Vivitante Rentista" [NB: vivitante is a word not in the Spanish Dictionary so it is probably a typo for Visitante] Visitante Rentista or Visitor living on his/her income in accordance with....etc. Check your own FM3. If it says Vivitante as mine does, it could be that Mexico has coined a new word meaning one who lives.

In no way does the FM3 say that I used to be a turista. It does say that I am here as a "visitor" living on my annual income which has been proven to the Mexican Government and that I am in no way an immigrant. Now what is the difference between a tourist and a visitor? Lets not quibble. In either case it is not permanent. The Chinese have a proverb that visitors and fish stink after 3 days. Tourists can be obnoxious in 3 minutes.

Hasta luego. jerezano.

La Isla

Nov 19, 2009, 12:53 PM

Post #20 of 22 (6869 views)

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Re: [jerezano] Income tax- just a little tweak re: FM-3

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I fear we may be quibbling (great word, ¿verdad?) a bit, but I'll just take it a little further before I quit. My FM3 does say this on Page 4: "Característica Anterior: TURISTA. Este documento faculta a su titular a permanecer en el país en calidad de No Inmigrante por 365 días como NO INMIGRANTE CON ACTIVIDAD LUCRATIVA..." On page 8, ANOTACIONES COMPLEMENTARIAS, it goes on to say PRESTAR SERVICIOS COMO MAESTRA DEL IDIOMA INGLÉS DE MANERA INDEPENDIENTE CON DOMICILIO PARTICULAR EN MÉXICO, D.F." Nowhere does it call me a "Visitante" or "Vivitante (sic?)", perhaps because I'm working here. ¿Quién sabe?

(This post was edited by La Isla on Nov 19, 2009, 12:58 PM)

mazbook1

Nov 19, 2009, 7:33 PM

Post #21 of 22 (6806 views)

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Re: [La Isla] Income tax- just a little tweak re: FM-3

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Everyone is sort of talking at cross-purposes here, as no one seems to realize that not all FM3, 365 day, unlimited entry and exit, non-immigrant visas are equal (or even cost the same!). Here is a list of the specific types of FM3 visas and the present cost (rounded):

Visitante, con entradas y salidas múltiples (FM3)

a). Para dedicarse a actividades no lucrativas $1,294.00
b). Para dedicarse a actividades no lucrativas, por cada prórroga $1,294.00
c). Para dedicarse a actividades lucrativas $2,102.00
d). Para dedicarse a actividades lucrativas, por cada prórroga $2,102.00
IV. Asilado político, por la revalidación anual $1,294.00
V. Estudiante, por cada revalidación anual $2,102.00
VI. Visitante provisional $420.00
VII. Ministro de culto o asociado religioso:
a). Por el otorgamiento de la característica $249.00
b). Por cada prórroga $249.00

a. & b. are the rentista visas that most folks are familiar with and the renewal. There are probably other categories of this besides rentista, but I am only familiar with the rentista category.
c. & d. are the "working" or "investing" visas, of which there are MANY VARIATIONS that are spelled out EXACTLY in the individual document and the renewal. Holders are ONLY legally enabled to do the exact actividad(es) that is/are spelled out in the visa.

IV. is the political asylum visa
V. is a student visa
These two types are only renewable upon annual revalidation of the holder's status.

IV. I'm not sure just what a provisional visa is, but I doubt that it applies to anyone on this forum: I'm fairly certain that this is what foreign musicans coming for a concert tour, sports team members coming for a game, etc., have to get. Since their purpose is definitely (usually) actividades lucrativas, they need this sort of one-time visa rather than just a FMT tourist visa. I doubt that these are valid for 365 days.

VII. This is the visa for a priest or a preacher. a. is the charge for granting the status and b. is the charge for renewing the visa.

So you see that to have any sensible discussion on this each person should identify exactly which sort of FM3 visa they have, or we're all comparing apples to oranges.

You will note, NONE of these categories mention either tourist or resident. They give the holder the right to VISIT México for 365 days…THAT'S ALL.

Me, I need not identify my FM3, since I don't have one. I'm a proud Mexican citizen with an official Credencial para Votar so I don't have to worry about such things.

wynco

Mar 9, 2010, 12:42 PM

Post #22 of 22 (5603 views)

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Re: [mazbook1] Income tax- just a little tweak re: FM-3

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hi reading back on forums and interested in your last sentence. I have gone thru the whole hog. fm3 fm2 and now imigrado. what I dont understand is what do I carry backwards and forwards surely not my fm2 which is old and used.
Is there a next step which I know nothing about. How do I become a Mexican citizen? is it difficult? My friend also interested in getting to fm2 and beyond - he is pensioner which large pension from his company - will he be liable for tax on this?and are there any special tax rates for citizens of Mexico -Can you write off housing and expences here in Mexico?. Dont really want to get accountant involved here at this stage as they will only want to know and tell us to their benefit. If the percentage is better than our own country then he should go ahead dont you think? if you can throw light on my problem and his then would appreciate it. e mail wynco@gvtc.com regards Wyn