Newsletter #8

The State of Baja Sur and COVID.

Baja Sur is busy for the high season! Mexico seems to be one of the only places US tourists can still get away, so people are showing up in droves. Tourists are out and about, and luckily most are very respectful of social distancing and wearing masks. Restaurants are open and activities are happening across the peninsula, while taking COVID precautions. All in all, everyone in the area is enjoying themselves in the sunshine while sipping that margarita. People that have decided to visit are mainly the ones who have chosen to take the risk to travel so have a slightly different mentality than people with higher risks.

Beaches are all OPEN. We do see the crowds at Cerritos more spread out then a typical season. We have not seen the camping communities on beaches as we have seen in the past. We are not exactly sure if this is banned, or simply discouraged this year. The other thought is these were mainly Canadian communities, and Canada has made traveling much more difficult than the US, so many travelers may have decided to stay home.

COVID.

It is hard to know of COVID numbers exactly as it is still expensive to get tested, but not impossible. We have not heard of any major outbreaks in the community lately, and typically that news spreads quickly. That being said, the state has announced we may go from “orange” to “red” on their stoplight system, but no specifics are being said yet on timing.

There is also an article posted on Baja Insider stating that it is a law to wear a mask outside of your home. That being said, there is no enforcement of this except in restaurants. We have seen places temporarily shut down until they are meeting COVID guidelines.
http://www.bajainsider.com/article/face-coverings-now-law-bcs

Below is information on Mexico’s traffic light system. The color is reassessed every 2 weeks.
https://www.jdsupra.com/legalnews/mexico-s-covid-19-traffic-light-7584965/

You can also learn more and stay up to date on the 2 week changes:
https://ogletree.com/insights/red-orange-yellow-green-go-considerations-for-reopening-in-mexi co-social-educational-and-economic-activities/

Appreciation and Apologies.

We would first like to appreciate our incredible Tu Casa community for standing with us during our family emergency. We have been beyond touched and humbled by the support and love, plus the abundance of patience you have given us. This was of course 100% unforeseen, and you have allowed us to continue our business while doing what was need as a family. You are our lifeline. Thank you from the bottom of our hearts!

On that note - I apologize we have not had a newsletter since August! Sal’s injury was in September, so it makes sense August was the last one. Wow, it seems like a lifetime ago. I am getting back on the newsletter writing bandwagon. :)

We are happy to keep everyone updated on Caringbridge, and LOVE the comments of support and encouragement. We are VERY happy with Sal’s growth, and general miraculous recovery. I will not get into details here as I am trying to keep that for Caringbridge. We are hopeful Sal and I will be back in Mexico full time in the Spring. We will find out more details next week after the next round of images.
https://www.caringbridge.org/visit/saldamarco

Business News.

Alex just arrived back in Mexico today, January 7th. Nancy, Marta, Bibiana, and Meghan have been working their tails off while we were both gone. We have a few contracted employees you may have seen around, or heard us speak about, Luis and Chuy. Our team is growing and we could not be happier. We have so much appreciation for our intelligent, hardworking, problem solving, and committed Tu Casa team members.
We have hired Meghan Dohnal part time to help with invoicing and financial tracking. We are working hard to create systems that work with our growing business. If you see any mistakes on invoices, please let us know so we can quickly make changes. Thanks for your hard work team, and we appreciate all that is done to help grow Tu Casa.

Taxes.

Many questions have come in about taxes now that we finished awful 2020. I am sure many of you have seen the new regulations showing up in AIRBNB and VRBO emails.

After speaking with our accountant earlier this year - we learned about the new short term rental law that went into effect JUNE 2020. I will write my best description of what this means for you, but I do encourage you to do some research beyond what I am writing so you can make the best decisions for your rental property. There are some areas that I am still unsure about, so again - please continue to do research and update us if you learn more than we know!

Mexico has caught on to the income generated that is not being taxed through venues like Airbnb and VRBO/Homeaway. Airbnb and VRBO/Homeaway (and other sites) will now ask for your Mexican Tax ID. If you are able to provide your Mexican Tax ID then nothing will change. The government will assume you are already claiming your income and paying taxes accordingly. If you are not able to provide a Mexican Tax ID, the site will begin to take your taxes from your income. The breakdown looks like the following - Airbnb and VRBO already take 3% Hotel tax. This will not change. They will begin to take the 16% VAT tax. This is the basic sales tax for all of Mexico. Also, they will manually collect income tax. This is based on your monthly generated income: up to 5,000 pesos - 2%, up to 15,000 pesos - 3%, up to 35,000 pesos - 5%, over 35,000 pesos - 10%

● Let’s do some numbers:

• ○  $2,000 USD income on rentals in January
  • 3% - $60 (Hotel Tax - already deducted)
  • 16% - $320 (VAT Tax)
  • 10% - $200 (Income Tax)
• ○  Total: $580 taken for taxes plus your airbnb/vrbo fees.
• 
  

​This is significant. While it is frustrating, I also understand why the Gov’t is stepping in, and this is also happening in other areas of the world with short term rental sites. The issue is many of you pay taxes on this income in the states or Canada.

What you really need to know:
Airbnb is insinuating it is easy to obtain your Mexican tax ID - RFC number. This may be a good option for some, but there are positives and negatives for both getting this and not. If you have an RFC number, you are then committing to being a temporary or permanent resident of Mexico. This also means you will need to begin paying income taxes on your rental income - 30%. Although, you can also make deductions to reduce that rate. You will need to hire an accountant in Mexico that you pay monthly. You will also have to make payments to and from Mexican bank accounts for this money to be seen as taxed or as a deduction. If you are using your RFC number to send money to pay us, for example, you will have to pay the 16% VAT tax, which you later get back as your deduction. Confused yet??
​
It isn’t a terrible process, but in my opinion, if you are not living in Mexico as your primary residence, plan to start a corporation to hold your Mexican home, or have another greater purpose for needing an RFC, we strongly recommend allowing the booking site to automatically deduct your taxes. You can then claim that deduction and income through your US tax claims, as you will already have paid in Mexico. All in all, if you do not have an RFC number, you are not breaking any Mexican laws, you are having your taxes automatically taken out of your earnings from the booking site. Please let us know if you have any questions, as we are happy to connect you with accountants and lawyers that have helped us.