Moving from Mexico Tax Guide 2026: Departure Declaration, ISR Exit Rules & IMSS/AFORE Withdrawal

KEY INSIGHT

Mexico does not impose a formal exit tax on departure. Residents who leave Mexico must file a final ISR (Income Tax) return for the year of departure, covering January 1 to the date of departure. Your RFC (tax ID) remains active unless formally cancelled with the SAT (Servicio de Administración Tributaria). AFORE retirement account funds can be withdrawn on permanent departure from Mexico, subject to Mexican income tax withholding at source. Mexican real estate owned as a non-resident is subject to 25% withholding on gross proceeds or 35% on net gain on eventual sale.

At a glance

Key Facts

Mexico ISR Tax Rates and Residence Rules

Mexican residents are taxed on worldwide income under the ISR (Ley del Impuesto Sobre la Renta). ISR rates: 1.92% (up to MXN 8,952.49), progressing to 35% (on income above MXN 3,498,600.12 — 2026 thresholds, indexed annually). Mexico uses a territorial approach for non-residents: after losing Mexican tax residency, only Mexican-source income is taxable in Mexico. Tax residency is determined by: primary establishment of home (casa habitación) in Mexico; or having the centre of vital interests (centros de intereses vitales) in Mexico — i.e., more than 50% of total annual income from Mexican sources, or principal activity/business in Mexico. Loss of residency: when you establish your primary home in another country and sever your centre of vital interests from Mexico. The SAT considers the totality of circumstances — physical presence, family location, and where the majority of income is generated.

Final ISR Return and SAT Departure Procedures

On ceasing Mexican tax residency: Final ISR return: must be filed for the period January 1 through the departure date. File Form 1 annual declaration on the SAT's portal (declaración anual). Income to report: all worldwide income from the period of Mexican residency in the year. RFC (Registro Federal de Contribuyentes): Mexico's tax ID. The RFC is not automatically cancelled on departure. Options: (1) Keep RFC active: useful if you retain Mexican investments, real estate, or business activities generating Mexican-source income. Filing obligations as non-resident continue for Mexican-source income. (2) Cancel RFC: possible via formal process with the SAT — requires no outstanding tax obligations. SAT exit clearance: Mexico does not require a formal tax clearance certificate (liberar fiscal) for individuals on departure — unlike some countries. However, if you have significant tax obligations outstanding, the SAT can object to certain asset transfers. Non-resident SAT obligations after departure: monthly or annual declarations for Mexican-source income (rental income, business profits, etc.) via the non-resident withholding system or by appointment of a Mexican fiscal representative.

AFORE Retirement Account: Withdrawal on Permanent Departure

AFORE (Administradoras de Fondos para el Retiro) is Mexico's mandatory defined contribution pension system, funded by employee (1.125% of salary), employer (5.15%), and government contributions. All formal-sector employees in Mexico contribute to AFORE. On permanent departure from Mexico: AFORE withdrawal (retiro por desempleo o mudanza al extranjero): employees who have left their job and are permanently departing Mexico can withdraw their AFORE balance. Requirements: (1) Have not been employed in Mexico for at least 46 days prior to application. (2) Have an active AFORE account. (3) Present documentation of permanent departure (foreign residence visa, passport with exit stamps, etc.) to the AFORE administrator. (4) Tax withholding by AFORE: the AFORE withholds ISR on the taxable portion of the withdrawal. The worker's own contributions (cuota obrera) are not subject to ISR; employer and government contributions (and their earnings) are taxable. Typical effective withholding: 10%–35% on the taxable portion depending on total amount. IMSS social security benefits: Mexican social security (IMSS) benefits (healthcare, disability) end on departure from Mexico. IMSS contributions are not refundable — unlike AFORE. Mexican pension (IMSS pension at 65): preserved as a deferred benefit if you have sufficient contribution weeks (750 weeks minimum).

Mexican Real Estate: Non-Resident Sale Rules

Mexican real estate owned by non-residents is subject to Mexican ISR on sale. Non-resident withholding options on sale of Mexican real estate: (1) 25% on gross sale proceeds (no deduction for purchase cost). (2) 35% on net capital gain (proceeds minus original cost, adjusted for inflation using INPC — Índice Nacional de Precios al Consumidor). The buyer or notary withholds at source; the notary handles the tax payment. Primary residence exemption: if the property was your primary residence for at least 3 years before sale and you have no other income from property sales in the year: the first MXN 700,000 of gain is exempt — but only if you are a Mexican resident at the time of sale. Non-residents do not qualify for the primary residence exemption. Restriction zones: Mexico restricts direct foreign ownership of real estate in 'restricted zones' (within 100 km of international borders and 50 km of coasts). Foreigners in restricted zones must hold real estate through a Mexican fideicomiso (bank trust) or a Mexican company. On departure: the fideicomiso remains structured under Mexican law regardless of the beneficiary's residence. Non-resident rental income: subject to 25% ISR withholding (or net income under Article 159 LISR election).

Mexico-USA DTA and Cross-Border Planning

The Mexico-USA Double Tax Agreement (DTA, entered into force 1993) governs cross-border income for the majority of Mexican emigrants. Key provisions: Employment income: taxed in the country of work; 183-day employee exception for short-term cross-border workers. Business profits: taxed in Mexico only if a permanent establishment (PE) exists. Dividends: 5% Mexican withholding (10%+ shareholding) or 10% (portfolio). Interest: 4.9%–15% depending on beneficiary type. Royalties: 10% Mexican withholding. Capital gains: gains on Mexican real estate always taxable in Mexico. Gains on Mexican company shares: may be taxable in Mexico if the company holds primarily Mexican real estate. Mexican social security: Mexico has totalization agreements with 15+ countries including Canada, Spain, Germany, France, and several Latin American countries. No US-Mexico totalization agreement: this creates a double social security obligation issue for Americans working formally in Mexico — IMSS contributions from the Mexican employer AND US self-employment tax (for self-employed Americans). Capital gains from Mexico for US persons: US CGT applies on Mexico-source gains; FTC available for Mexican ISR paid on the same gains.

Introduction

Mexico is a major emigration corridor — both for Mexican nationals moving abroad and for foreign residents (particularly Americans and Canadians) departing after working or retiring in Mexico. Mexico's tax system is residence-based, and departure ends Mexican worldwide tax residency, leaving only Mexican-source income in scope. The key departure issues are the final ISR return, AFORE withdrawal, and ongoing non-resident obligations on Mexican real estate.

Section 01

Moving from Mexico to the USA: Key Cross-Border Tax Issues

The Mexico-USA corridor is one of the world's largest migration routes. Key tax issues for those moving from Mexico to the United States:

Year of entry — US substantial presence test: If you are not a US citizen or green card holder and arrive in the US, you become a US tax resident when you meet the Substantial Presence Test (183 days in the current year, counting 1/3 of days from the prior year and 1/6 from the year before that). File Form 1040 as a dual-status alien for the year of arrival.

Mexican AFORE and US FBAR: Your AFORE account is a foreign financial account reportable on FBAR (FinCEN 114) if the aggregate value exceeds $10,000. Report each AFORE account.

Mexican real estate held as US resident: You can retain Mexican real estate as a US resident. Rental income is taxable in both Mexico (25% withholding) and the US (Form 1040 Schedule E, with FTC for Mexican taxes paid). Capital gains on eventual sale: taxable in Mexico (25% gross or 35% net); taxable in the US (subject to US CGT with FTC for Mexican taxes).

Mexican business interests: If you own a Mexican company and become a US resident: the company may become a Controlled Foreign Corporation (CFC) — Subpart F and GILTI rules apply. Consult a US international tax adviser before establishing US residency while retaining a Mexican company.

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FAQ

Frequently Asked Questions

Does Mexico charge an exit tax when I leave permanently?

No — Mexico does not have a formal 'exit tax' (impuesto de salida) on individuals departing permanently. There is no deemed disposition of assets at departure equivalent to Canada's Section 128.1 or Japan's ¥100M exit tax. However: (1) A final ISR annual declaration is required for the year of departure, reporting all worldwide income from January 1 to the departure date. (2) If you have outstanding ISR obligations, the SAT can take collection action before you transfer assets out of Mexico. (3) Certain asset types — particularly deferred compensation and unvested equity from Mexican employers — may continue to be Mexican-source income after departure. (4) Mexican real estate and business interests remain in the Mexican tax system after your departure as a non-resident taxpayer. The absence of a formal exit tax is one of Mexico's advantages as a departure jurisdiction — compare to Canada (deemed disposition on all non-exempt assets) or Japan (¥100M threshold on financial assets).

Can I withdraw my AFORE retirement funds when I move abroad?

Yes — if you are permanently leaving Mexico and have been unemployed from your last formal Mexican employment for at least 46 days. Contact your AFORE administrator (SURA, Coppel, ProfuturoGNP, Azteca, etc.) with your departure documentation. The process: (1) Request a 'retiro por desempleo y cambio de domicilio al extranjero' (unemployment and change of address abroad withdrawal). (2) Provide passport, proof of foreign residence or visa, Mexican CURP (Clave Única de Registro de Población), and CLABE bank account for deposit. (3) The AFORE administrator processes the withdrawal, withholds ISR on the taxable portion, and deposits the net amount. Timeline: typically 2–4 weeks processing time. If you have a small balance: some AFORE administrators allow full immediate withdrawal. If significant balance: the withdrawal is processed in tranches or as a lump sum depending on the administrator's policy. Important: once you withdraw your AFORE balance, you lose your position in the Mexican pension system for those contribution weeks. If you later return to work in Mexico: you start a new AFORE account with no prior contributions credited.

I own a beach house in Mexico — what are my tax obligations as a non-resident?

As a non-resident owner of Mexican real estate: (1) Annual property tax (predial): paid to the local municipality — continues regardless of residency. Set up pre-authorised payments or use a local property manager. (2) Rental income: if you rent the property, Mexican ISR applies at 25% on gross rental income (withheld by the tenant if a Mexican legal entity is the tenant) or 25% on gross under the general non-resident rate. Alternatively, elect the net income regime (Article 159 LISR) via a Mexican fiscal representative, paying ~35% on net rental income after deductions — better if maintenance costs are high. (3) Eventual sale: 25% on gross proceeds OR 35% on net gain — whichever the notary calculates. No primary residence exemption for non-residents. (4) Fideicomiso (trust) structure: if your beach property is in a restricted zone (coastal) and held via a Mexican bank trust (fideicomiso), the trust continues to exist with you as a non-resident beneficiary. Annual fideicomiso maintenance fees: approximately $500–$1,000/year to the trustee bank. (5) US reporting: Mexican real estate is not reportable on FBAR (not a financial account) or Form 8938 (not a financial asset). But rental income and capital gains must be reported on Form 1040, with FTC for Mexican taxes paid.

What happens to my IMSS social security contributions when I leave Mexico?

IMSS (Instituto Mexicano del Seguro Social) social security contributions are not refundable to employees or employers — they are a compulsory contribution that funds Mexico's public social security system. On departure: (1) IMSS healthcare: your IMSS healthcare coverage ends when you are no longer registered as an active worker or voluntary contributor. There is no portable benefit equivalent to CPP or UK State Pension. (2) IMSS disability and life insurance: ends on departure. (3) IMSS retirement pension: if you have accumulated 750 or more weeks of IMSS contributions before departure, you are entitled to a deferred IMSS retirement pension starting at age 65 (or 60 for early retirement at a reduced rate). The pension is paid in Mexican pesos to a Mexican bank account — no international payment option in most cases; you would need to visit Mexico or use a Mexican bank account. (4) Voluntary continuation: you can voluntarily continue IMSS contributions as a self-employed person after leaving formal employment — but this is rarely worthwhile unless you plan to return to Mexico or need specific IMSS services. (5) Mexico-Canada totalization agreement: if you are Canadian moving from Mexico, the Mexico-Canada social security agreement may allow IMSS contribution weeks to count toward Canadian CPP eligibility — check eligibility with Service Canada.

Disclaimer:This guide provides general tax information for educational purposes only. Mexican ISR rules, AFORE regulations, and SAT procedures change with federal budgets and administrative guidance. Nothing in this guide constitutes tax or legal advice. Consult a Mexican CPA (Contador Público) before departing Mexico.

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