MEXICO Trends and Developments Contributed by: Christian Lippert, Gabriela Pellón, Cecilia Díaz-de-Rivera and Fabiola Jiménez, Galicia Abogados, S.C.
Overview of the Impacts of Dual or Multiple Tax Residency on Estate Planning in Mexico Introduction As families and individuals become increasingly global-living – investing, working and raising children across multiple countries – their legal and tax foot - prints grow more complex. This is particularly true when it comes to estate planning. The interaction of multiple tax residency rules, nationality-based tax sys - tems and cross-border asset ownership can lead to unintended consequences, such as double or even triple taxation, conflicting legal obligations, and the risk of inefficient or unenforceable planning structures. This article provides an overview of the key issues that arise when dual or multiple tax residency over - laps with estate planning for individuals with ties to Mexico. It highlights the main categories of taxes that affect wealth globally, explains how different legal sys - tems may characterise the same person or structure in divergent ways, and underscores the importance of recognising these differences when planning for asset protection, succession and intergenerational wealth transfer. While Mexican law offers flexible and effective estate planning tools – such as wills, fideicomisos and/or donation agreements – these must be evaluated in the broader context of foreign tax systems and inter - national legal frameworks. Properly navigating this landscape requires early, customised and co-ordinat - ed planning, especially for individuals with complex family, financial or national profiles. Dual or multiple tax residency: basic concepts Each country has its own domestic rules to determine who qualifies as a tax resident, and these rules are not harmonised internationally. In general, most countries consider a person to be tax resident – and thus subject to tax on their income (mostly on a worldwide income and only a few on a territorial income basis) – if they have a close personal connection with the country. This connection can be based on domicile, residence or even their citizenship/ nationality.
Because these criteria vary from country to country, it is entirely possible for a single person to be treated as a tax resident under the laws of two or more countries at the same time, giving rise to a double tax residency conflict. When this happens, each country may claim the right to tax that person’s entire global income (this is called full tax liability), leading to double or multiple taxation on the same income in hands of the same person. Consider the case of an individual who owns a home in both Mexico and the UK. This person spends more than six months each year in the UK, receives over 50% of their income from dividends paid by a Mexi - can company, and is also a US national. Based on the domestic tax rules of each of these three countries, the individual may be considered a tax resident in all of them simultaneously. Under UK law, spending 183 days or more in the country generally results in automatic tax residency. In the USA, nationality alone is enough to trigger full tax liability, regardless of where the person lives. In Mex - ico, having a dwelling available within the country (as an owner or tenant) meets residency rules. Therefore, if the person has two or more available dwellings in other countries, the tie-breaker rule for Mexican pur - poses is based on where the majority of their income is derived or the centre of their professional activities is located. As a result, this individual could be subject to world - wide taxation in three different jurisdictions, and exposed to a combination of income tax (Mexico, UK, US), estate or inheritance tax (US and UK), and capital gains tax (UK, as a specific tax separate from income tax). Taxes on wealth Understanding how different countries define tax residency is only part of the picture. To fully grasp the implications of being a tax resident in more than one jurisdiction, it is also necessary to understand the types of taxes that may apply to an individual’s wealth. The Subcommittee on Wealth and Solidarity Taxes of the United Nations (Subcommittee on Wealth and Sol - idarity Taxes, Guidance as of March 2024, Appendix
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