Given the new restriction that will no longer allow homeowners who rent their property via digital platforms to pay their federal taxes under Régimen de Incorporación Fiscal (RIF), therefore losing the great discounts that tax system has along with its other benefits, we have done a comparison using example figures of what taxes look like under RIF and under the new system for rentals done through online platforms.
Before we get to numbers, here's a summary of the main differences between both systems:
Analyzing these differences has led to ask about what seems like a violation to the equality principle that is supposed to be the essence of tax legislation by not allowing taxpayers who meet the requirements to file under RIF and almost "punish" them for doing their business through digital platforms; when posed with this question, experts who were consulted during the legislative process that resulted in this tax reform have argued that RIF is for "small" businesses, as if doing business online automatically turned taxpayers into "large" businesses.
Regardless of all the debate this stirs, and as there seem to be no extensions or further changes to the reform for the time being, homeowners who use digital platforms to generate rentals need to consider the impact this will have on their cash flow. This is an example based on the following assumptions:
A homeowner on their 6th year filing under RIF, thus having a 50% discount on federal taxes.
MXN $950,000.00 in gross income spread over the high season.
40% of that gross income (MXN $380,000.00) in deductible expenses. This is, meeting all the requirements established in Mexican tax laws for deductions.
This example considers all twelve months in a year, even though this will only apply to seven months this year (June-December)
Based on these parameters, this is what a year's numbers would look like:
A very important thing to bear in mind is that IVA is a tax on consumption, which means it is the client (the guest in this case) the one who is actually paying it. So the IVA impact can be offset by adding it to your listing's rates. In terms of income tax, it is based on tax profit, so deductions planning will become more important than ever so as to minimize the impact of these changes.
We have designed an online spreadsheet where you can simulate RIF and digital platforms system's taxes simply by inputting your gross income, deductible expenses and number of years paying under RIF. You can find this tool by clicking here. If you have problems using it or you get any type of error, please feel free to contact us.