In a previous article, we examined the Mexico Digital Nomad Visa and how to best apply for it. The official name for the Mexican digital nomad visa is the temporary residence permit, which allows holders to stay for between one and four years in Mexico, depending on renewals.
When deciding on whether to apply for a temporary residence permit, one of the important questions that location-independent travellers ask themselves is whether they will be better off in terms of taxation. We will explore this further in this article and compare the situation with some other countries, including Malta.
If you earn 51% of your income or more outside Mexico, you will most likely be taxed in your country of origin and will not be subject to the mexican tax regime at all. This is because they have agreements in place with many other countries to prevent double taxation on earnings.
The level of taxation you will therefore be liable for while you are in Mexico will be heavily dependent on which other country you are a tax resident of. Many digital nomads who travel constantly will seek to minimise their exposure to taxation and try not to be resident for tax purpose in any one jurisdiction.
This can be a complex situation to maintain and a mis-step along the way can see very large tax bills suddenly appearing on the horizon, so great care should be taken if attempting to navigate that particular route.
Nothing in this article constitutes financial advice and for the best and most up to date advice on international taxation you should contact your own tax adviser.
If you are planning to be tax-resident in Mexico then you should be aware that Mexican taxes range from 0-30% and these bands are determined in a progressive manner with higher tax bands for those who are earning more money.
If you choose to remain in Mexico for more than 183 days per calendar year, you may be asked to pay tax in Mexico on all of your worldwide earnings, if you are unable to conclusively prove that you qualify on other grounds in another country. For example, you may own property in the UK and be employed by a company there, so HMRC would most likely still see you as a UK tax resident in that scenario.
There are generally two tax bands that can apply to non-residents in Mexico and these are 15% or 30%, dependent on your level of income but it is unlikely that most digital nomads will have to contend with this, as most wont have to pay Mexican taxes at all.
If you are in any doubt, stay on the correct side of the law by seeking accurate financial advice from an expert.
The gold standard that all of the other digital nomad visas and taxation offers have to match up to is Malta’s. That is because Malta is keen to attract digital nomads for the skills, entrepreneurship and expertise that they bring to the country.
Making Malta the home to many tech startups is a main goal and rooting it as a technology hub is well underway, with reliable internet infrastructure and coworking and coliving spaces on the island already.
Malta has a tax situation for digital nomads that is probably one of the best in the whole world. For the first year of the digital nomad visa in Malta, you will pay no tax at all. This isn’t dependent on tax residence in any other country either. For the second and subsequent years, if you renew, it is a 10% flat no matter what you earn.
The tax offer from Mexico is inferior to the one from Malta, because you will still have to pay tax to the country that you are a tax resident of, and at its lowest rate, the Mexican tax for digital nomads is 15%. This means that the zero % first year and subsequent years of 10% tax make Malta a much better low taxation solution for any digital nomads and remote workers who would like to take advantage of it.
The lifestyle offered to digital nomads in Mexico is one that is varied and is only limited by your own imagination.
Depending on where you are planning to go in Mexico, you may opt for beaches and wild nightlife in a resort such as Cancun or Playa Del Carmen.
Alternatively, you may prefer to spend some time exploring the beauty and splendour of Mexico City, or take off to explore some of the Aztec and Mayan ruins.
One of the most iconic and world-renowned of these ruins is Chichen Itza.
Mexico generally has a sinister reputation for drug cartel violence but tourists rarely get caught up in it, and if you are careful with your belongings ad your personal safety, this should not be an issue for you. The Mexican authorities have done a lot of work in recent years to ensure that the violent crimes related to the narco-traffickers is contained and kept away from tourist areas.
Experienced travellers will know better than to involve themselves in anything to do with the drug trade in Mexico and those who are new to travelling should go in with a healthy awareness of the situation.
Don’t allow the threat of violent crime to diminish your trip. You are probably far more at risk by wandering into the wrong part of any major US city than you are in most places in Mexico. Just keep your wits about you, try not to show lots of money in public, and take care when walking alone at night. It is preferable to get a taxi if you are in an area that isn’t familiar to you.
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