Taxes when investing in Mexico
Investing also pays taxes. The basics on gains, dividends and interest for individuals resident in Mexico, and how the tax statement helps you.
This lesson summarizes the general rules for individuals resident in Mexico. Rules change and every case is different: for important decisions, consult an accountant.
1. Gains from selling stocks and ETFs (BMV and SIC)
When you sell stocks or ETFs you bought on the BMV, BIVA or the SIC through a Mexican brokerage, you pay 10% income tax on the year's net gain: the sum of your gains minus your losses. The brokerage calculates your cost basis adjusted for inflation, so the taxable gain is usually somewhat less than the one you see.
This tax isn't withheld when you sell: it's paid in your annual return. Losses you don't offset in the year can be used against gains in later years, within the time limits set by law.
2. Dividends
- From Mexican companies: an additional 10% is withheld from the dividend you receive.
- From U.S. companies (via the SIC): the U.S. withholds 10% if you have the W-8BEN form (30% without it), under the treaty between the two countries; and Mexico withholds another 10%.
- Dividends are included in your annual return; the brokerage's statement tells you how much you received and how much was withheld.
3. Interest (CETES, bonds, notes, accounts)
Interest pays income tax in two parts. During the year, the institution makes a provisional withholding on the capital invested, at a rate set each year by the Federal Revenue Law. In your annual return you report the real interest (what you earned above inflation) and the amount withheld is credited. If inflation was high, real interest can be small or even negative.
4. Foreign brokers
If you invest outside a Mexican brokerage, gains from selling stocks are generally added to your other income and taxed at your income tax schedule (1.92% to 35%), and you calculate and report them yourself. Foreign dividends and interest must also be reported. There are also special rules if you invest in low-tax jurisdictions. Here advice really pays off.
5. The tax statement and the annual return
- At the start of each year your brokerage or bank gives you a statement with gains, losses, dividends, interest and withholdings.
- That information usually appears pre-filled in the SAT's return, but check it.
- If you had gains from selling stocks, dividends or interest, in many cases you must file the annual return (in April).
| Type of income | Mexican brokerage | How it's paid |
|---|---|---|
| Gain on sale (BMV/SIC) | 10% of the year's net gain | In the annual return |
| Mexican dividends | Additional 10% withheld | Withholding and annual return |
| U.S. dividends (SIC) | 10% in the U.S. with W-8BEN + 10% in Mexico | Withholding and annual return |
| Interest | Provisional withholding on capital | Real interest reported in the annual return |
Test what you learned
1. With a Mexican brokerage, how much income tax is paid on the year's net gain from selling stocks?
- 0%
- 10%
- 35%
Show the answer
10%. It's 10% on the year's gains minus losses.
2. What is the W-8BEN form for?
- Opening a CETES account
- So the U.S. withholds 10% instead of 30% of your dividends
- Avoiding taxes in Mexico
Show the answer
So the U.S. withholds 10% instead of 30% of your dividends. It applies the tax treaty between Mexico and the U.S.
3. For interest, what is reported in the annual return?
- The full nominal interest
- The real interest (above inflation)
- Nothing
Show the answer
The real interest (above inflation). The effect of inflation is taken out.
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Everything in this section is educational: it explains how investing works, it doesn't tell you what to buy.