## Understanding Mexican Tax for Property Rentals
If you manage rental properties in Mexico, you need to navigate three primary tax obligations: IVA (Value Added Tax), ISR (Income Tax), and CFDI (Digital Tax Invoicing). Each has specific rules depending on whether you're dealing with short-term vacation rentals or long-term leases.
This guide covers what property managers in Mexico need to know to stay compliant with the SAT (Servicio de Administracion Tributaria).
IVA: Value Added Tax
The Basics
IVA applies to most goods and services in Mexico, including short-term rental accommodation. The standard rate is 16%.
Short-Term Rentals (STR)
For vacation rentals through platforms like Airbnb or VRBO, the IVA situation has a critical nuance: **platforms may withhold IVA on your behalf.** Since Mexico's digital platform tax rules took effect, Airbnb withholds and remits IVA for hosts.
This means you need to track: - Which bookings had IVA withheld by the platform - Which bookings (direct) require you to charge and remit IVA yourself - The correct IVA amount per booking for your records
Long-Term Rentals
Long-term residential leases are generally exempt from IVA in Mexico. However, commercial leases are subject to the standard 16% rate. Know the distinction for mixed-use properties.
ISR: Income Tax
How ISR Works for Rental Income
ISR is Mexico's income tax, and rental income is taxable. The rate depends on your total income and filing status (persona fisica vs persona moral).
For platforms: Airbnb and similar services withhold a provisional ISR rate on each booking. This withholding rate is typically lower than your final tax rate, meaning you may owe additional ISR when filing your annual return.
Key Considerations
- **Deductible expenses**: Maintenance, repairs, property taxes, insurance, platform commissions, and professional services can reduce your taxable rental income - **Depreciation**: Buildings (not land) can be depreciated over their useful life - **Monthly provisionals**: If you receive rental income directly, you must file monthly provisional ISR payments
CFDI: Digital Tax Invoices
What is CFDI?
CFDI (Comprobante Fiscal Digital por Internet) is Mexico's mandatory electronic invoicing system. Every commercial transaction requires a CFDI — this includes rental income.
When You Need CFDI
- Every rental payment received (including from platforms) - Every expense you want to deduct - Every service you provide to tenants
Practical Impact
This means your property management system needs to track each transaction with enough detail to generate or reconcile CFDIs. Many property managers do this manually — a process that can take hours per month with multiple properties.
How BasePro Handles Mexican Tax
BasePro's three-level tax configuration was designed specifically for the complexity of Mexican property rental:
Level 1: Organization Defaults
Set your standard IVA and ISR rates at the organization level. These apply to all properties unless overridden.
Level 2: Property-Specific Overrides
Different property types have different tax treatments. A commercial space in Cabo San Lucas has different IVA rules than a residential rental in La Paz. Override at the property level without affecting your other properties.
Level 3: Booking-Source Exceptions
Airbnb withholds IVA and ISR. Direct bookings don't. BasePro lets you mark tax treatment at the booking source level, so Airbnb bookings automatically reflect withholding while direct bookings charge the full rate.
Staying Compliant
Monthly Checklist
1. Verify all rental income is recorded with correct IVA treatment 2. Confirm platform withholdings match your records 3. File monthly provisional ISR payments for direct income 4. Generate or reconcile CFDIs for all transactions 5. Review deductible expenses for completeness
Annual Filing
Your annual SAT filing requires: - Total rental income by source - Platform withholdings applied - Deductible expenses with CFDI backing - Depreciation schedules for properties - Final ISR calculation with credit for provisionals
Common Mistakes
1. **Not tracking platform vs direct income separately** — different IVA/ISR treatment applies 2. **Missing CFDI reconciliation** — every transaction needs backing documentation 3. **Forgetting state taxes** — some Mexican states have additional lodging taxes 4. **Not claiming deductible expenses** — maintenance, insurance, and professional fees are deductible but need CFDIs
The Bottom Line
Mexican tax compliance for property rental isn't simple, but it's manageable with the right system. The key is tracking each transaction with enough detail to know: what was the source, what tax was withheld, what tax is owed, and what documentation backs it.
BasePro's tax configuration handles this complexity at three levels — organization, property, and booking source — so you set rules once and they apply correctly across your entire portfolio.