Fideicomiso Property Taxes and ISR for Foreigners Renting in Mexico

A foreigner who rents out a property held in a fideicomiso in Mexico owes two main taxes: the annual predial (municipal property tax), which is very low, and ISR (impuesto sobre la renta), the income tax on rental earnings. Predial is a small fixed annual cost, while ISR depends on how much you earn and which tax regime you choose. Holding the property through a fideicomiso does not change your tax obligations; you are taxed as the beneficial owner just as any owner would be.

Here is how each tax works for an American or Canadian renting out an oceanfront condo in a place like Ensenada.

Predial: the annual property tax

Predial is Mexico's municipal property tax, billed once a year and calculated on the cadastral (assessed) value of your unit, not its market price. For most condos it is strikingly low by US standards, often only a few hundred dollars annually.

Key points:

• It is paid to the municipality, usually in January or February.
• Many municipalities offer discounts of 10 to 20 percent for paying early in the year.
• The fideicomiso trustee bank also charges a separate small annual trust fee, which is not a tax but a recurring cost to be aware of.

For owners of a premium oceanfront residence, predial remains modest relative to the property's value, which is one reason Mexican coastal real estate is attractive to hold.

ISR: income tax on your rental income

When you rent your condo, the rental income is taxable in Mexico because that is where the property sits. As a non-resident foreign owner, you generally have two ways to be taxed.

Flat-rate withholding on gross income

The simplest method taxes non-residents at a flat rate of roughly 25 percent on gross rental income, with no deductions. It is straightforward but does not let you subtract expenses, so it can be costly if your operating costs are high.

Resident-style regime on net income

Alternatively, by registering with the Mexican tax authority (SAT) and obtaining an RFC, you can be taxed on net income, deducting legitimate expenses such as:

• Property management fees
• Maintenance and repairs
• Predial and trust fees
• Depreciation of the building

The net income is then taxed on a progressive scale. For many owners with real operating costs, this lowers the effective tax meaningfully compared with flat-rate withholding.

A Mexican accountant should run both scenarios for your situation, because the right choice depends on how much you rent and what you spend.

IVA and the role of platforms

If you rent furnished short-term, IVA (value-added tax, 16 percent) typically applies and must be charged and remitted. Platforms like Airbnb and Vrbo increasingly withhold and remit a portion of ISR and IVA directly to SAT for hosts in Mexico, which simplifies compliance but does not eliminate your obligation to file. You still need an RFC and, in most cases, a Mexican accountant to reconcile what was withheld against what you owe.

Putting the numbers together

A realistic annual tax picture for a foreign owner renting an Ensenada condo might look like:

• Predial: a few hundred dollars, paid early for the discount.
• Trust fee: a modest annual amount to the trustee bank.
• ISR: flat 25 percent of gross, or net-income tax after deductions if you register with SAT.
• IVA: 16 percent on furnished short-term rentals, often handled in part by the platform.

The combination is generally manageable, and the low predial in particular makes the carrying cost of Mexican coastal property far lighter than comparable US oceanfront real estate.

Stay compliant on both sides of the border

Remember that paying Mexican tax does not end your obligations. US citizens still report worldwide income to the IRS, and you can usually claim a foreign tax credit for ISR paid in Mexico to avoid double taxation. Coordinate a Mexican accountant with your US tax advisor so the two filings line up.

Plan the tax side before you buy to rent

Rental yield is part of why many buyers choose oceanfront condos near the Ensenada coast, and understanding predial and ISR up front lets you model returns accurately. The taxes are predictable and, with the right regime, very competitive.

If you are evaluating a residence as a rental investment, our team can connect you with local accountants and share realistic income and cost figures for the building. Explore the residences and reach out through WhatsApp or our contact form to arrange a private visit and discuss the numbers.