Taxes on Rental Income for Foreign Property Owners in Mexico (RFC, ISR & the 20% Withholding Explained)

Do foreigners pay tax on rental income in Mexico?

Yes. If you are a US or Canadian owner renting out a Puerto Vallarta condo, the rent is Mexican-source income and is taxed in Mexico, whether you list on Airbnb or sign a long-term lease. The good news: with a Mexican tax ID (RFC), your effective tax burden is usually low. Without one, platforms withhold at roughly double the rate.

This article is general information as of 2026, not tax or legal advice. Mexican tax rules change frequently and the exact rates and rules that apply to you depend on your situation, residency status, and how you hold the property. Always confirm with a licensed Mexican contador (tax accountant) and, if you are a US or Canadian taxpayer, with a cross-border advisor before acting.

Do I need residency to buy property or to rent it out?

No. You do not need Mexican residency, a visa, or even to be physically in Mexico to buy property here. Buying property also does not grant you residency by itself. In the coastal and border "restricted zone" (roughly within 50 km of the coastline or 100 km of a border, which includes Puerto Vallarta and the Riviera Nayarit), foreigners hold beachfront and ocean-view property through a bank trust called a fideicomiso, which gives you full ownership rights including the right to rent, remodel, sell, or inherit.

Residency is a separate question from taxes. You can own and legally rent your property as a non-resident. What changes your tax outcome is not residency, it is whether you register for an RFC. For the full closing picture, see our guide to closing costs in Puerto Vallarta.

What is the RFC, and why does it matter so much for rentals?

The RFC (Registro Federal de Contribuyentes) is Mexico's tax ID number, issued by the tax authority, SAT. It is the single most important document for a foreign owner who rents.

A common myth is that you must be a resident to get one. Under rules in effect for 2025-2026, foreigners who earn Mexican-source income, and rent is the classic example, can generally register for an RFC without holding residency. Practically, that typically involves:

• A signed letter of purpose (escrito libre) stating you are registering to comply with tax obligations from rental activity in Mexico.
• Your home-country tax ID (for a US person, your SSN or ITIN), sometimes apostilled or certified.
• A CURP, which SAT generates or validates during the process.

Because some SAT offices are unfamiliar with non-resident registrations, most owners use a local contador or facilitator. Having an RFC lets you issue official invoices (facturas), deduct expenses, register your RFC with Airbnb so it withholds at the lower rate, and stay in good standing with SAT.

What is the 20% withholding, and how does Airbnb withhold tax in Mexico?

Digital platforms such as Airbnb, Vrbo, and Booking are legally required to withhold Mexican tax on your payouts and remit it to SAT. The rate depends on one thing: whether you have given the platform a valid RFC.

• With an RFC on file: the platform withholds a reduced ISR (income tax) rate, reported around 4% of your rental income, plus it collects and remits IVA (VAT), withholding roughly half of the 16% you charge guests.
• Without an RFC: the platform withholds at the maximum, reported around 20% ISR plus the full 16% IVA.

In other words, skipping the RFC can roughly double what is pulled from every payout. These are withholding percentages that SAT and the platforms publish; the withholding is not always your final tax, and the exact figures can change year to year, so confirm the current numbers with your contador.

ISR: income tax and the RESICO option

ISR (Impuesto Sobre la Renta) is the income tax on your rental profit. Individuals who rent property generally choose between two frameworks:

• RESICO (Simplified Trust Regime): a flat, low ISR rate reported in the range of roughly 1% to 2.5% of gross income, available to individuals whose income stays under an annual cap (reported around 3.5 million pesos). It is simple but does not allow expense deductions.
• Traditional leasing regime: lets you deduct actual expenses (maintenance, property tax/predial, interest, management fees) or take a "blind deduction" (deducción ciega) of about 35% of gross rent plus the predial, without receipts.

For short-term Airbnb hosts, the platform's 4% ISR withholding (with RFC) can serve as a simplified final payment. Which regime is cheapest depends on your numbers, so this is exactly the kind of decision to run past a contador. See how the local rental market performs in our breakdown of how much an Airbnb earns in Puerto Vallarta.

IVA: does VAT apply to my rental?

IVA (VAT) is 16% and generally applies to short-term, furnished, hotel-style lodging, which is what most Airbnb listings are. Long-term unfurnished residential leases are typically IVA-exempt. If you rent short-term, the 16% is charged on top of your rate and, with an RFC, the platform helps collect and remit part of it. Keep short-term and long-term strategies distinct, because their tax treatment differs.

What about capital gains when I sell?

Capital gains (also ISR) apply when you sell. This is where residency and RFC matter most. A generous primary-residence exemption (reported up to around 700,000 UDIs, roughly 5-6 million pesos, once every three years) is generally available only to sellers who are Mexican tax residents with an RFC and can prove the property was their home. Non-residents typically do not qualify and instead face tax calculated as roughly 25% of the gross sale price or about 35% of the net gain, whichever their notary applies. This alone is a strong reason to plan your ownership structure early with professionals.

The bottom line for US and Canadian owners

Renting your Mexican property is straightforward once you understand the pattern: get an RFC, register it with your rental platform, pick the right ISR regime with a contador, and handle IVA correctly on short-term stays. Because the US and Canada both have tax treaties with Mexico, taxes you pay here can often be credited against your home-country return, reducing double taxation, another reason to keep clean records and facturas.

The single biggest mistake we see is renting without an RFC and quietly losing 20% off the top. A short conversation with the right advisor usually pays for itself.

Talk to HOMIA (and a tax professional)

HOMIA helps foreign owners in Puerto Vallarta and the Riviera Nayarit buy, structure, and manage rental property, and we can connect you with vetted contadores who handle non-resident RFC and rental filings. Contact HOMIA to talk through your property and your goals, then confirm the specifics with a licensed Mexican tax advisor before you list.

Authoritative reference: Mexico's tax authority, SAT (sat.gob.mx), and the federal government portal, gob.mx.