Thursday, December 30, 2010

Visas - and I don't mean credit cards

I recently did a website for a pretty big company down here. It's ready but still not up, which is strange because they've paid for it, but that's Mexico. Often there are things going on that I don't understand.

To get this job, I had to be able to issue a factura. That's a government invoice. The man who hired me suggested I go to a company in town here who could help me out.

That company does this- they "hire" you. So on your FM3 visa (a temporary resident visa we pay about $300 a year for), it would say I worked for them. Then they take $50/month and 10% of your income. Well. I had no real choice so I went for that. It cost about $200 to have my visa adjusted, and another $100 for the services of the person who went into the government office to have that done.

Later I was told that this particular company had a history of maybe not exactly paying your taxes correctly, and you could possibly get in trouble with the government. So they suggested I should start a business. Talked to a lawyer about that, and that would cost in the neighborhood of $3000. OK, no go there.

Another contact said I didn't need to start a business, I just needed a tax ID. OK, cool! I went with her to the tax office and procured myself a tax ID. Now she needed to take my visa and take off the original company and put on my tax ID instead.

But as my FM3 visa was coming up for renewal, I asked her if it would be smarter to get an FM2 instead. Yes, she said. Because while you have to renew an FM3 every year indefinitely, if you live here full time you can procure an FM2 instead. While it is more expensive year-to-year, you only need to renew it four times and then you are a Mexican resident. (Not a citizen, a resident.) Then you no longer need a visa. Or at least that's the story I get now.

Here is the explanation from a site that corresponds with what I understand: "Essentially, the FM2 is like a green card, or resident alien visa. It entitles you to many of the rights of a Mexican citizen (except voting) and entitles you to work. (You may also work on an FM3 visa.) Officially, after five years of living in Mexico and successfully meeting the requirements of FM2 status (including restricted time out of Mexico), you may make a declaratoria de inmigrado.

Inmigrado status does not require you give up your native citizenship, but holders may freely work and remain in Mexico without annual renewals of immigration papers."

I'll give you a few moments to digest that. Here, look at this pretty picture while you do so:

OK, so $460 to get an FM2 visa with my tax ID on it. $150 to get my tax ID and factura forms.

Now I need to get an accountant. She costs 800 pesos a month. A peso=.08 of a dollar. So about $64. She explains the tax system to me.

I can get a factura (a government invoice) for everything I buy except food. Doesn't really matter if it's for the business or not. Gas, toys, lawn furniture (we have no lawn, but you get the picture), etc etc. I have to carry a card around with my name, address and tax ID on it, and I have to ask for a factura for everything.

Sometimes they say, "Yes, you can have a factura but then we need to add 11%". That's usually for large purchases. In that case I say, "no thanks".

OK, so I take my facturas in to the accountant, including the $1600 I made for the website. And after a month she says, OK now you have to pay income tax. 3700 pesos.

Now, from here on in, if I don't make any Mexican income (And I have to charge clients that 11% tax, so I can't just put my Canadian and American clients through this business), she will only charge me 200 pesos a month. That's a huge relief.

Also, I can continue to collect facturas, and that will take my taxes down over the year. I don't know if I will have to pay taxes again on that $1600, it remains to be seen. Or I may get money back, it's hard to say.

So, here is the arithmetic:

I got $1600 USD.

It cost me:
$300 -change FM3
$460- get FM2
$150 - tax ID and factura forms
$ 64- Oct with accountant
$ 64- Nov with accountant
$296 - taxes
$ 16 - Dec with accountant

I am hoping that my future business transactions here are a little more profitable.

Oh, by the way, ignore everything you read about what is required to obtain a visa here. Wait until you get down here, and find a reliable person to take you through the process.

Here's another pretty picture. It's what makes the above story much less stressful.


  1. Okay, I understood NONE of that, but the pictures were pretty.

  2. Nothing complicated about it. You just say the Spanish equivalent of 'D'accord' and hand over money. (David Sedaris reference there).

  3. We know the system. One person tells you one thing, another person another and somewhere in the middle is the right answer if you are lucky. Hard for a Canadian to understand , or even a Mexican sometimes, but in the end it all seems to work out. Like your new blog.