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Mexican Tax ID: Why Foreigners Need It and How to Get One

Portrait Andrew Schulhof

#303-1338 West Broadway
Vancouver
British Columbia
V6H 1H2

My recent trip to Mexico to check on Campomar Residencial, a preconstruction project nearing completion, included obtaining my Mexican Tax ID (RFC) in preparation for closing on the property. The RFC is essential for various financial, business, and legal activities in Mexico, and the process for foreigners involves specific steps and documentation, best navigated with local professional assistance.

As many of you know, my wife and I are focused on Mexico as a lifestyle investing destination. On my recent trip down to look at the progress of Campomar Residencial, a preconstruction project that is nearing completion, it was time to obtain my Mexican Tax ID, also known as the Registro Federal de Contribuyentes (RFC), in anticipation of closing on the property this year.

What is the RFC?

The RFC is a unique identifier used by the Mexican government for tax purposes. It’s essential for various financial, business, and legal activities within Mexico. The RFC is like a Social Insurance Number (SIN) in Canada or a Social Security Number (SSN) in the United States. It is used to track all tax-related activities of individuals and entities, including income, business transactions, and other financial operations.

How to Obtain an RFC as a Foreigner

The process for obtaining an RFC as a foreigner involves several steps. Here’s a general outline of the process:

Determine Eligibility

Foreigners can obtain an RFC if they:

  1. Are employed in Mexico
  2. Own or operate a business in Mexico
  3. Own property in Mexico
  4. Engage in financial activities that require tax reporting

Gather Required Documents

You will need the following documents:

  1. Passport: A valid passport is necessary for identification.
  2. Visa: An appropriate visa showing legal status in Mexico (e.g., temporary or permanent resident visa). As we already have our temporary resident ID card, that was very helpful in expediting the process.
  3. Proof of Address: A recent utility bill or rental agreement showing your address in Mexico. We had already an address there, so we were able to use that address.
  4. CURP: The Clave Única de Registro de Población (CURP) is a unique population registry code. If you don’t have a CURP, you will need to obtain one. When we received our temporary resident’s cards we were issued the CURP at the same time.

Visit SAT Office

The Servicio de Administración Tributaria (SAT) is the Mexican tax authority responsible for issuing the RFC. Visit the nearest SAT office to submit your application. It’s advisable to make an appointment online through the SAT website to avoid long wait times.

Complete the Application Form

At the SAT office, you will need to complete the application form. SAT officials will assist you in filling out the form and ensuring all information is correct.

Submit Documents

Submit the required documents along with the completed application form to the SAT office. SAT officials will review your documents and process your application.

Receive Your RFC

Once your application is approved, you will receive your RFC. This can be provided immediately at the SAT office or sent to you electronically.

Additional Tips

  • Language: While some SAT offices may have English-speaking staff, it’s beneficial to have a basic understanding of Spanish or bring a translator.
  • Online Services: Some parts of the application process can be initiated online through the SAT website, especially if you already have a CURP.
  • Professional Assistance: Consider hiring a local accountant or legal advisor who is familiar with the process, especially if your situation involves complex business or financial matters.

In reviewing all these previous steps, I felt that due to the limited time I had in Mexico to successfully take on this important task, I chose to hire a lawyer that knows the ins-and-outs of this process.

It cost me $3,000 Pesos which is about $225 to deal with all of it. I started the process by providing the lawyer the necessary info, setting appointment with the lawyer to go to the SAT office while still in Canada well ahead of my arrival in Mexico.

Because of my age (over 60) I am considered an elder and was able to do this without an appointment and was put in a separate queue. What was interesting in this process, is that the RFC needs to be updated every three months or when something changes with one’s livelihood or financial status.

Updating one’s RFC can be done online, but many people don’t do that and line up before dawn at the regional SAT office to update their RFC…and then wait for several hours for a 5-minute process. I was shocked to witness this as it was both young and old people and many with smart phones. This is one example of the form over function that is existent in Mexico and in order to enjoy your time there you must be prepared to accept these type differences from your home country, or it can be challenging.

What are the Reasons for a Foreigner to Get a Mexican Tax ID?

As touched on previously in this blog, there are several reasons why a foreigner might need to obtain a RFC.

The bottom line is, as in most countries, the government relies on taxes being paid for the services provided by the government such as health care, infrastructure, etc. So, while many people don’t wish to pay taxes, they are necessary to run the country, state, town. Here are the most common ones:

Employment in Mexico

If a foreigner is employed by a Mexican company or works in Mexico, they need an RFC for tax purposes. This includes those working as employees or as independent contractors.

Starting a Business

Foreigners who wish to start or invest in a business in Mexico need an RFC to register the business and comply with tax obligations.

Professional Services

Foreigners providing professional services in Mexico may need an RFC to issue invoices and comply with tax reporting requirements.

Import and Export Activities

Engaging in import or export activities necessitates an RFC to comply with customs and tax regulations.

Property Ownership 

Buying real estate in Mexico typically requires an RFC. This is necessary for the transaction process and to comply with tax regulations on property ownership.

It is super helpful if you are going to claim an adjusted cost base to your property, for instance, if you are making any capital improvements or additions.

This is because you will need to ask for a facture (official receipt) which will be used in determining your capital gains should you wish to sell your property at a later date. I highly recommend speaking with your accountant in your home country to discuss the implications at home of owning a property in Mexico (or any foreign country) to have everything set up correctly.

With any facture, there will be additional taxes charged because it is an official receipt.

Many transactions are done in cash and there is no facture involved but those expenditures will not be factored into the adjusted cost base.

Rental Income

If a foreigner rents out a property that they own in Mexico, they need an RFC to report rental income and pay the necessary taxes.

Whether you’re renting out your property short-term or long-term, you will need at RFC. It is very important to discuss your rental intentions with a Mexican CPA first, to ensure that you set things up correctly to avoid errors in the tax treatment.

Bank Accounts

Opening a bank account in Mexico often requires an RFC. This applies to both personal and business accounts. You will also need a Mexico address. I have been through this process, and it can be challenging if you are unprepared. As with the RFC, I highly recommend starting this process while still in your home country.

Investment in Mexican Financial Instruments

If a foreigner invests in Mexican stocks, bonds, or other financial instruments, they may need an RFC to manage taxes on any gains or dividends.

Obtaining Loans or Credit

Applying for loans or credit in Mexico generally requires an RFC as part of the financial institution’s requirements.

Legal Compliance 

For general compliance with Mexican tax laws, any financial or business activity in Mexico, requires proper identification and registration with the tax authorities. There is a requirement in Mexico to file an annual tax return on or before April 30th for the previous year.

One step that I found invaluable was while you are still at home, to ask the lawyer or other service provider to review the documentation you provided if the documentation is correct, complete, and do they need anything else. I also asked them to share with me the expected steps and timelines so that I was prepared and was able to schedule accordingly. Appointments in Mexico do not always adhere to the timelines that we are accustomed to at home.

By understanding the requirements and following these steps (recommended with the assistance of an English-speaking lawyer), you can successfully obtain an RFC and ensure compliance with Mexican tax regulations. Overall, obtaining an RFC helps ensure compliance with Mexican laws and facilitates smooth operation in various financial, legal, and business activities in the country, and it will provide you more peace of mind when owning a property or doing any business in Mexico.

If you need introductions to my connections or have questions, I welcome your questions about my experience so far. Just email me with your questions. Adios for now.

Get in Touch

If your are interested in investing in real estate, or looking to list your current home, I can help you form the appropriate strategy and answer any questions you may have. 

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