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Andrew Henderson

Founder of Nomad Capitalist and the world’s most sought-after expert on global citizenship.

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Finance • Legal Tax Reduction

How to Live in Mexico Tax-Free (Not Easy)

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Mexico has many faces. It overflows with life, music, colour and celebration, especially in Mexico City, a place that truly never sleeps. 

From touristy coastal resorts where expats mingle with locals to off-the-beaten-path retreats where nature and tranquillity abound, in Mexico, you can decide what you want to be. There’s a reason the United Mexican States is one of the most popular countries in Central America.

Mexico has a rich cultural history, from ancient Aztec temples to the most UNESCO World Heritage Sites in the Americas. Its rainforests, beaches, plains and mountainscapes make it a perfect destination for adventurers and those searching for peace and relaxation. Mexico’s sunny, temperate climate, vibrant modern cities and family-friendly culture attract massive numbers of people from across the globe. 

Many Americans, Canadians and people from all around the world choose Mexico as their preferred lifestyle destination because it offers them personal freedom and a lower cost of living. 

Officially, you can’t pay zero tax in Mexico. Unofficially, some people do but we’ll get to that later.

In terms of being an attractive country with a good lifestyle, Mexico has an abundance of charm. Yes, alternative locations exist, like the tax havens of the United Arab Emirates (UAE) or Vanuatu, but are those destinations really on your bucket list?

If you have wealth you want to grow and protect with tax incentives there’s little point in doing that in a country which doesn’t appeal to you as a place to live or visit. The ideal scenario is finding a place where you can do both, depending on your personal goals.

Why Move to Mexico?

Why Move to Mexico

Contrary to what you may have been told, Mexico is not a poor country. It’s one of the wealthiest in the region, with the fifteenth-largest GDP in the world, and attracts plenty of wealthy visitors.   

You’ve also got a favourable climate, with numerous hot coastal places like Los Cabos, Puerto Vallarta, The Yucatan, Cancun and Playa del Carmen. There are cities with higher elevations, like Mexico City in south-central Mexico and San Miguel de Allende.

The country has a diversity of culture and landscapes, so if you don’t like the desert, the coast, or even big city life, you can find pretty much any type of lifestyle you want here and that includes a more temperate climate.

There’s also an efficient health service here with a number of internationally accredited hospitals, especially in Mexico City. In terms of the perceived language barrier, it’s not as extreme as some think. Lots of people learn English in schools as they do in most countries in Latin America, so it’s spoken, particularly in tourist areas where there are more expats. Anyway, Spanish is one of the easier languages to learn.

How to Get Residence in the United Mexican States

Mexico city

Mexican residency can be a great option for people who want to live there but also obtain a paper residency that will lead to a passport with no investment. 

The conditions for residency are relatively straightforward. It can be achieved by showing sufficient financial means. This could be via proof that you’ve maintained a minimum deposit of around US$53,000 for 12 months or showing that you have deposited a consistent monthly income of about US$3,275 for the past six months. 

We don’t advise buying property because that’s tied to your residence and could lead to your being considered a tax resident. 

The road to residency begins with an appointment at your nearest Mexican consulate, where you’ll have a short interview. Once that’s done, a visa sticker will be issued on your passport. Using that visa sticker, you must travel to Mexico immediately for an appointment with the Mexican immigration service. 

If you don’t speak Spanish, this process might be a bit complicated as the employees at the immigration office don’t usually speak English. So, be prepared to seek help with the process. 

Once approved, you get a residency card and can leave Mexico. You don’t have to visit Mexico to maintain residency but, after one year, you must return in order to renew it. 

After four years, you can switch your temporary residence to a permanent one. It’s then possible to qualify for citizenship. You can become a citizen after five years, but you have to spend 18 months of years four and five living in Mexico. 

This will make you a tax resident of Mexico and although it has the potential to be tax-friendly, you will still need to report and pay taxes.

Why Mexico is a Good Residency to Have

Even if you don’t live there, Mexican residence affords you the opportunity to spend time there and even move there in the future. Once you become naturalised in Mexico, you are free to visit Canada or the US as a tourist.

Recently, Mexico has done an incredible job of increasing the power of its passport. Over the last 20 years, the countries you can visit visa-free with this passport have grown in line with so-called developed countries like America. 

If you’re looking for a place to move and you’d like to become a Mexican citizen, this passport really is an excellent travel document. Though Mexico isn’t a rich country, it’s technically an upper-middle income one, so it’s a relatively soft landing for people from developed countries and definitely so in terms of culture. 

With its proximity to the US, it’s obviously a good option for North Americans who desire an easy escape to another country. It’s a very popular backup residence for people who don’t want to live there because it’s cheap and easy to obtain. 

But if you don’t want to live there, there’s virtually no physical presence requirement, and you only have to visit for a few days to maintain it. 

During the Covid-19 pandemic years, Mexico was a popular destination. One of the main reasons for this was that Mexico was, and remains, very freedom-oriented – you didn’t really have the restrictions that were imposed elsewhere. So, even if you might not use it now, it’s a good residency permit to keep in your back pocket.

Citizenship of Mexico

Citizenship of Mexico

Citizenship is possible after five years of permanent or temporary residency, but you must be there continuously for 18 months. If applying for citizenship, you must prove you can speak Spanish, know the country’s history and are integrated into the national culture.

You can still hold citizenship elsewhere. If you want to live there, a tax strategy becomes essential. To be deemed a tax non-resident, you have to structure it properly so your life and economic ties there don’t draw you into the tax loop.

Officially, there’s no great benefit to citizenship in terms of tax. This option is more about the lifestyle benefits and freedoms you’ll achieve in Mexico.

The Mexican Tax System

Mexico’s tax system is worldwide, so it’s not a territorial tax country like Panama, Chile or Costa Rica. This means, in theory, that your foreign-sourced income will be taxed there. 

Many people live there and choose not to pay tax on offshore income, but that’s not strictly legal and certainly isn’t a strategy we’d ever endorse or recommend. Instead, try contacting us at Nomad Capitalist to create your own tax and asset protection plan. You can find out more here

Tax residents are subject to Mexican income tax on their worldwide income, regardless of their nationality and this will apply if you spend more than 183 days in a single tax year there. However, the 183-day rule is not applied in isolation and you’ll also be judged on your intention to live in Mexico. 

If you establish a permanent home there and do not have a substantial residence in another country, you are deemed a tax resident. You will be considered to have your centre of vital interests in Mexico if more than 50% of your income comes from Mexican sources in a year or if Mexico is the primary place of your professional activities. 

You’ll also have difficulty proving you don’t intend to live in Mexico if your family relocates and establishes a home there, either rented or owned.

Therefore, the simplest option is to avoid becoming a tax resident. You can still become a permanent resident and visit the country whenever you choose but you can’t have Mexico-sourced income or spend more than 183 days there. 

You can avoid tax residency if you don’t spend a lot of time in Mexico and show proof that you don’t intend to live there. That’s as long as you don’t have assets in your own name in Mexico or connections such as bank accounts or property there.

The longer you stay, the harder it becomes to avoid the tax authorities. For this reason, it might be a good idea to secure an additional tax residency in a different jurisdiction in order to solidify the claim of not being a tax resident in Mexico.

However, if you decide you want to live there full-time and be deemed a tax resident, we recommend you get an official tax document stating your position. This may lead to your being audited by the tax authorities.

If you’re from the US and become a tax resident, moving to Mexico full-time will leave your status tax-neutral, based on a tax treaty where you don’t pay double taxation. 

Maximise Your Freedom, Minimise Your Taxes

Mexico is a relatively straightforward residence permit to get and you won’t have to invest a lot of money. It’s a big country with many unique places to visit but the tax system there could best be described as ‘interesting’. 

It’s probably not where you want to move full-time for the reasons already outlined. But it’s a great place to start putting together a trifecta strategy. This strategy provides a number of residency options: You can spend time travelling between lifestyle and freedom-friendly countries while limiting your tax obligations and effectively paying zero, or very little, tax. Nomad Capitalist founder, Andrew Henderson, explains the trifecta approach and how to use it to your advantage in this video.  

Most people will enjoy the lifestyle in Mexico. There’s amazing nature, culture and incredible food, and it’s cheap. Geographically, it’s a location that Americans and Canadians like because it’s close to home. But others can enjoy many benefits there as well.

As a backup residency option that you can rely on if circumstances change and you need a quick exit, there are few better than the United Mexican States. Alternatively, if you’re a US citizen who wants to renounce, then proximity and access to America matter and the high-quality Mexican passport makes total sense. You might also want access to top-tier countries your current passport can’t offer. 

Whatever the case, this is all about choosing your own tax rate and legally reducing your taxes while living your desired lifestyle: maximum freedom with minimum tax.

For more than a decade, Mexican residence has been one of the most popular options for our clients. Nomad Capitalist has lots of experience and expertise in helping people navigate the challenges associated with Mexico. We have helped 1,500+ high-net-worth clients, and we can help you. It’s what we call ‘going where you are treated best‘.

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